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F e d e r a l R e s er v e Ba n k o f D a lla s DALLAS, TEXAS 75222 C i r c u l a r No. 75-63 May 12, 1975 AMENDMENTS TO REGULATIONS G, T , AND U (S u sp e n sio n of Limitation of "Same-Day S u b stitution" Rule Extended Until S e p te m b e r 30, 1975) TO ALL BANKS, BROKERS/DEALERS, REGULATION G-REGISTRANTS, AND OTHERS CONCERNED IN THE ELEVENTH FEDERAL RESERVE DISTRICT: T h e Board of G o v e rn o rs of th e F ed eral R e s e rv e System has e x te n d e d until Sep tem b er 30, 1975, a s u s p e n s i o n of th e r u le th a t norm ally a p p lie s to the u se of the s a m e -d a y s u b stitu tio n p r i v i l e g e in stock m a rg in a c c o u n ts . The e x te n sio n will allow time for f u r t h e r c o n sid e ra tio n by the Board an d consultation with in te re s te d p a r tie s of th e impact of the r u l e on m a rg in c u s t o m e r s , b r o k e r a g e firm s, and the stock m a rk e t itself. U nder the sa m e -d a y s u b stitu tio n p r i v i l e g e , c ustom ers a r e p e rm itted to s u b s titu te one s e c u r it y for a n o th e r in t h e ir a cc o u n ts th r o u g h offsetting p u r c h a s e s and sales made on the same d a y , w ithout a p p ly in g additional m a rg in for the p u r c h a s e or u sin g any of the p ro c e e d s of the s ale to s tr e n g t h e n an acco u n t th a t is b e low the initial m arg in r e q u ir e m e n t. T he ru le th at was s u s p e n d e d for six months November 4, 1974, limited u s e of th is p r iv i le g e to m arg in acc o u n ts with an e q uity of 40 p e r c e n t o r more of the m a rk e t value of the stock co llateral in the a cc o u n t. T h e additional s u s p e n s i o n a p p lie s to e x te n sio n s of c r e d it by b r o k e r s and d e a l e r s (Regulation T) and loans by b a n k s an d o th e r le n d e rs (R egulations U an d G, re s p e c tiv e ly ) for the p u r p o s e of p u r c h a s i n g o r c a r r y i n g s tocks r e g i s t e r e d on a n a tional e x c h a n g e o r named on the B o ard 's o v e r - t h e - c o u n t e r m a rg in list. In subm ittin g the am endm ents for p u b lic a tio n in the FEDERAL REGISTER, the Board of G o v e rn o rs made the following statement: T h e B o a rd 's s e c u r it ie s c r e d it r e g u la tio n s , P arts 207, 220, and 221 (Regulations G, T , an d U) , g e n e r a ll y r e q u i r e th a t in the case of This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org) 2 p u r c h a s e - a n d - s a l e s u b s titu tio n s of s e c u r it ie s in an u n d e r m a r g in e d acc o u n t, a sp ecified po rtio n of the p r o c e e d s from the s e c u r it ie s sold must be u s e d to re d u c e th e c r e d i t . Until S e p te m b e r 18, 1972, th e r e was an exemption from th a t r e q u ir e m e n t w hen both the p u r c h a s e and sale w e re e x ec u te d on the same d a y . Effective Se p te m b e r 18, 1972, the Board n a rro w e d the s a m e -d a y s u b s titu tio n exem ption an d limited it to accounts w h e r e the c u s to m e r 's e q u ity was at least 40 p e r c e n t (37 F .R . 13972) . T he limitation imposed in 1972 was s u s p e n d e d for a s ix -m on th perio d from November 5, 1974, to May 5, 1975, w hile the Board r e viewed its a p p r o p r i a t e n e s s (30 F .R . 39433) . T he Board has d e t e r mined to e x te n d the s u s p e n s io n until Sep tem b er 30, 1975, to allow time for f u r t h e r c o n sid e ra tio n and consultation with in te re s te d p a r ties with r e s p e c t to an a n a l y s is of the impact of the limitation of the " s a m e -d a y su b stitu tio n " r u le . T h e r e s u l t of the B o a rd 's action will be to allow s a m e -d a y s u b s titu tio n s of collateral in all a ccounts w ith out r e g a r d to the c u s to m e r 's e q u ity in the collateral until S ep tem b e r 30, 1975, on the same b a s is a s e x iste d p r i o r to S e p te m b e r 18, 1972. T h e s e am endm ents a r e is su e d p u r s u a n t to the a u th o rity of Section 7 of th e S e c u ritie s Exch an g e Act of 1934 (15 U . S . C . S e c tion 78g) . T h e r e q u ire m e n ts of 5 U . S . C . Section 553 with r e s p e c t to notice, public p a rtic ip a tio n , and d e f e r r e d effective date w e re not followed in connection with this additio nal s u s p e n s i o n s in c e it te m p o ra rily r e lieves a re s t r ic tio n an d the Board found th at to follow the r e q u i r e ments of Section 553 would b e im p ractical, u n n e c e s s a r y , an d c o n t r a r y to the p u b lic in te re s t inasm uch as they would n e e d le s s ly c a u s e d i s ru p tion in the p r o c e d u r e s of le n d e r s c o v e r e d b y the B o a r d 's s e c u r i ties c r e d i t re g u la tio n s . Enclosed is a copy of the am ended S u p p le m e n ts to R egulations C, T , and U, w hich s h o u ld be filed in y o u r b i n d e r of R e g u latio n s. Additional copies will be fu r n is h e d upon r e q u e s t to the S e c r e t a r y 's Office of th is B ank. Sincerely y o u rs, T . W. P la n t F i r s t Vi ce P r e s i d e n t E nclosure BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM SECURITIES CREDIT TRANSACTIONS AMENDMENTS TO REGULATIONS G, T, AND U 1. Effective M ay 1, 1975, paragraph (f) of section 207.5 is am ended to read as follows: SE C T IO N — 207.5 — S U P P L E M E N T * * * * * (f) M inimum equity ratio. T he m inim um equity ratio of a credit subject to section 207.1 is 40 percent. F o r the period N ovem ber 5, 1974, through Septem ber 30, 1975, all same-day sub stitutions of collateral perm itted by section 207.1 (j) (2 ) for credits in w hich the equity ratio equals or exceeds the m inim um equity ratio shall also be perm itted fo r all credits in w hich the equity ratio is less th an the m inim um equity ratio. 2. Effective M ay 1, 1975, paragraph (3) o f sec tion 220.8(g) is am ended to read as follows: SE C T IO N — 220.8 — S U P P L E M E N T (g) A ccount subject to section 8(g). (3 ) F o r the period N ovem ber 5, 1974, through Septem ber 30, 1975, all transactions p e r m itte d by s e c tio n s 2 2 0 . 3 ( b ) ( 1 ) an d 22 0 .3 (g ) fo r accounts not subject to section 8 (g ) shall also be perm itted in accounts sub ject to section 8 ( g ). 3. Effective M ay 1, 1975, p aragraph (f) of section 221.4 is am ended to read as follows: S E C T IO N — 221.4 — S U P P L E M E N T (f) Minimum equity ratio. T he minimum equity ratio of a credit subject to section 221.1 is 40 percent. F o r the period N ovem ber 5, 1974, through Septem ber 30, 1975, all sa m e -d a y tr a n s a c tio n s p e r m itte d by se c tio n 2 2 1.1(c) for credits in w hich the equity ratio is equal to or exceeds the m inim um equity ratio shall also be perm itted fo r those credits in which the equity ratio is less than the m inim um equity ratio.
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