Full text of District Notices (Federal Reserve Bank of Dallas) : Amendment to Regulation T

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Fe d e r al

Re se r v e

Ba n k

of

Dallas

D A LLA S. TEX A S

August 4, 1961

AMENDMENT TO REGULATION T

To All Banks and Others Concerned
in the Eleventh Federal Reserve District:

There is enclosed an amendment to Regulation T, issued by the Board
of Governors of the Federal Reserve System, effective August 7, 1961.
The purpose of the amendment to § 220.4 is to clarify the Board’s position
as to the situations in which credit may be extended under paragraph (d)
of § 220.4 outside the margin restrictions of § 220.3 General Accounts,
and to provide more explicit standards for the use of these sections in
arbitrage situations. A conforming change is being made to paragraph
(d) (3) of § 220.3. The purpose of the amendment to paragraph (d) of
§ 220.6, relating to the transfer of general accounts between customers,
is to eliminate possible ambiguities and to make clearer what situations are
covered and what situations are not covered by that provision.
Member banks are requested to insert this amendment in their ring
binders containing the Regulations of the Board of Governors and the
Bulletins of this bank.
Yours very truly,
Watrous H. Irons
President

This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org)

CREDIT BY BROKERS, DEALERS, AND
MEMBERS OF NATIONAL SECURITIES
EXCHANGES

AMENDMENT TO REGULATION T
I ssu ed

by th e

B oard

of

G overnors

of t h e

F ederal R

eserve

System

E f f e c t i v e A u g u s t 7, 19 6 1 , s e c t i o n s 2 2 0 .3 ( ^ X 3 ) , 2 2 0 .4 ( d ) , a n d 2 2 0 .6 ( d )
a re a m e n d e d to r e a d a s f o l l o w s :

S E C T IO N 2 2 0 .3 —G E N E R A L A C C O U N T S
(d )

A d ju s te d d e b it b a la n c e .— *

(3 )

*

*

the current market valu e o f any se c u r itie s (other than un­

is s u e d s e c u r itie s) so ld short in the accou n t p lu s , for each such
s ec u rity (other than an exem pted

sec u rity ), su ch amount a s the

Board sh a ll prescribe from time to time in § 2 2 0 .8 as the margin
required for such

short s a l e s ,

ex c e p t that su ch amount so pre­

scrib ed in § 2 2 0 .8 need not be included when there are held in the
account s e c u r itie s ex ch an g ea b le or con vertib le within 90 calendar
d a y s , without restriction other than the paym ent o f m on ey, into
su ch s e c u r itie s so ld short;
S E C T IO N 2 2 0 .4 —S P E C IA L A C C O U N T S
(d )

S p e c ia l arbitrage a c c o u n t.—In a s p e c ia l arbitrage a cco u n t, a mem­

ber o f a n ation al
custom er bona fide

s e c u r itie s
arbitrage

exch an ge

may e ffe c t and fin an ce

tra n saction s

in s e c u r itie s .

for any

For the pur­

p o s e s o f th is paragraph, the term "a rb itra g e* m eans (1 ) a purchase or
s a le o f a secu rity in one market together with an o ffse ttin g s a le or pur­
c h a se o f the sam e secu rity in a different market at a s n early the same
time a s p r a c tic a b le , for the purpose o f taking advantage o f a d ifferen ce
in p rices in the two m arkets, or (2 ) a pu rch ase o f a secu rity w hich i s ,
without restriction

other than

the paym ent o f m oney, ex ch an g ea b le or

con v ertib le within 90 calendar days fo llow in g the date o f its purchase
into a secon d secu rity together with an o ffse ttin g s a le at or about the
sam e time o f such secon d se c u rity , for the purpose o f taking advantage
o f a d isp arity in the p rices o f the two se c u r itie s.

(Over)

S E C T IO N 2 2 0 .6 —C E R T A IN T E C H N IC A L D E T A IL S
(d )

T ran sfer o f a c c o u n ts .—(1 )

In the event o f the transfer o f a gener­

al accou n t from one creditor to another, su ch account may be treated for
the p u rposes o f th is part as if it had been m aintained by the tran sferee
from the date o f its origin :

P r o v id e d ,

T h at the tran sferee a c c e p ts in

good faith a sign ed statem ent of the transferor that no c a sh or s e c u r itie s
need

be d e p o sited

in the

account in con n ection

with any tran saction

that has been e ffe c te d in the account or, in c a s e he fin ds that it is not
p ra ctic a b le to obtain such

a statem ent from the transferor, a c c e p ts in

good faith such a sign ed statem ent from the custom er.
(2 )

In the even t o f the transfer o f a gen eral accou n t from one c u s to ­

mer to another, or to o th e rs, as a bona fide incident to a tran saction that
i s not undertaken for the purpose o f avoid ing the requirem ents o f th is
part, each transferee account may be treated by the creditor for the pur­
p o s e s o f th is part as i f it had been m aintained for the tran sferee from
the date o f its origin :

P r o v id e d , T h a t the creditor a c c e p ts in good faith

and k e e p s with the transferee account a sign ed statem ent o f the tra n s­
feror d escrib in g the circu m stan ces g ivin g rise to the transfer.