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Federal R eserve Ba nk of D allas DALLAS, TEXAS 75222 Circular No. 7^-297 November 7, 197^- AMENDMENTS TO REGULATIONS G, T, and U (Suspension of restrictions on same-day substitution for a period of six months) To All Banks, Brokers/Dealers, Regulation G-Registrants and Others Concerned in the Eleventh Federal Reserve District: The Board of Governors of the Federal Reserve System suspended for six months the restrictions that apply to use of the same-day substitution privilege in stock margin accounts. The suspension will permit use of the same-day substitution privilege in all margin accounts. The purpose of the suspension is to enable the Board to study the impact of the rule on margin customers, brokerage firms and the stock market itself. In submitting the amendments for publication in the Federal Register, the Board of Governors made the following statement: The Board's securities credit regulations, parts 207? 220, and 221 (Regulations G, T, and U), generally require that in the case of purchase-and-sale substitutions of securities in an undermargined account a specified portion of the sale proceeds must be used to strengthen the account; but until September 1 8 , 1972, there was an exemption from that requirement when both the purchase and sale were executed on the same day. By amendments published in the Federal Register at 37 Fed. Reg. 13972, effective September 1 8 , 1972, the Board narrowed the same-day exemption and limited it to accounts where the customer's equity was at least 40 percent. The limitation in the September 1 8 , 1972, amendments is now being suspended for a six-month period, from November 5, 197^+, through May 5> 1975, while the Board reviews the appropriateness or inappropri ateness in present circumstances of maintaining the 40 percent require ment with respect to the exemption of same-day substitutions. The result of the Board's action in suspending the limitation will be to reinstate for a six-month period the rules which were in effect before September 1 8 , 1972, permitting the substitution of col lateral in all undermargined accounts, without using a portion of the sale proceeds to strengthen the account, when the substitution is This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org) effected by a purchase and sale executed on the same day. These amendments are issued pursuant to the authority of section 7 of the Securities Exchange Act of 193^ (15 U.S.C. §78g). The requirements of 5 U.S.C. §553 with respect to notice, public participation and deferred effective date were not followed in connection with this suspension since it temporarily relieves a re striction and the Board found that to follow the requirements of section 553 would be impractical, unnecessary, and contrary to the public in terest inasmuch as they would needlessly delay both observation of results of the suspension and appraisal of the appropriateness or in appropriateness of maintaining the restriction. Enclosed is a copy of the amendments to Regulations G, T, and U; additional copies will be furnished upon request. Yours very truly, T. W. Plant, First Vice President Enclosure BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM SECURITIES CREDIT TRANSACTIONS A M EN D M E N TS TO REG U LA TIO N S G, T, A N D U 1. Effective November 5, 1974, paragraph (f) of section 207.5 is amended to read as follows: SECTION — 207.5 — SUPPLEM ENT # sis s}£ (3) For the period November 5, 1974, through May 5, 1975, all transactions permitted by sections 220.3(b)(1) and 220.3(g) for accounts not subject to section 8(g) shall also be permitted in accounts subject to section 8(g). >■« (f) Minimum equity ratio. The minimum equity ratio of a credit subject to section 207.1 is 40 percen t. F o r the p erio d N ovem ber 5, 1974, through May 5, 1975, all same-day substitutions of collateral permitted by section 207.1 (j)(2) for credits in which the equity ratio equals or exceeds the minimum equity ratio shall also be permitted for all credits in which the equity ratio is less than the minimum equity ratio. 2. Effective November 5, 1974, section 220.8(g) is amended by adding a new subparagraph (3) to read as follows: SECTION — 220.8 — SUPPLEMENT * * * * * 3. Effective November 5, 1974, paragraph (f) of section 221.4 is amended to read as follows: SECTION — 221.4 — SUPPLEM ENT * « * * * (f) Minimum equity ratio. The minimum equity ratio of a credit subject to section 221.1 is 40 percent. For the period November 5,1974, through May 5, 1975, all same-day transactions permitted by section 221.1(c) for credits in which the equity ratio is equal to or exceeds the minimum equity ratio shall also be permitted for those credits in which the equity ratio is less than the minimum equity ratio.
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