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federal Reser ve ban k of Dallas D ALLAS. TEXAS November 5, 1963 SUPPLEMENTS TO REGULATIONS T AND U T o All Banks and Others Concerned in the Eleventh Federal Reserve District: The Board o f Governors o f the Federal Reserve System has amended the supplements to Regulations T and U by increasing margin requirements from 50 percent to 70 percent, effective November 6, 1963. The press statement issued today in connection with this action is quoted b elow : “ The action covers extensions of credit hy brokers (R egu lation T ) and loans by banks (Regulation U ) for the purpose o f purchasing or carrying securities registered on a national securities exchange. Its effect will he to require persons buying stock on credit to put up a minimum o f 70 per cent of the price at the time of the transaction. “ The Board also amended the regulation to increase from 50 to 70 per cent, effective tomorrow, the amount that must be retained in an undermargined account with a brokerage firm or bank when there is a sale o f part o f the securities serving as collateral. An “ undermargined” account or loan is one in which the customer has an equity amounting to less than the current margin requirement; e.g., beginning tomor row, an equity o f less than 70 per cent. Thus, in the case of a sale o f part o f the collateral securing such an account or loan, the amount of the sale proceeds that can be withdrawn hy the customer will be 30 per cent. Since June 15, 1959, the amount that could lie withdrawn had been 50 per cent. “ The Board’s actions were taken pursuant to authority granted it by Congress in the Securities Exchange Act o f 1934 for the purpose of preventing excessive use o f credit for the purchase or carrying o f securities. (OVER) This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org) “ Since July 1962, when the margin requirements were reduced to 50 per cent from the 70 per cent that had pre viously prevailed, stock market credit, as reported by brokerage firms that are members of the New Y ork Stock Exchange and by weekly reporting banks that are members o f the Federal Reserve System, has risen by $2.1 billion or 43 per cent. O f the increase, nearly $1.8 billion was in customer net debits o f the brokerage firms, which rose 49 per cent. “ No other changes were made in the regulations.” A copy o f each o f the amended supplements is enclosed. Member banks are requested to insert these new supplements in their ring binders containing the Regulations of the Board o f Governors and the Bulletins o f this bank. Yours very truly, Watrous H . Irons President SUPPLEMENT TO REGULATION T Section 220.8— SUPPLEMENT I ssued by the Board of G overnors of the F ederal R eserve System Effective November 6, 1963 (a) M axim u m loa n value f o r gen eral accou n ts.— The maximum loan value of a registered security (other than an exempted security) in a general account, subject to § 220.3, shall be 30 percent of its current market value. ( b ) M argin req u ired f o r sh ort sales in general accou n ts.— The amount to be included in the adjusted debit balance of a general account, pursuant to § 220.3 ( d ) (3 ), as margin required for short sales of securities (other than exempted securities) shall be 70 percent of the current market value of each such security. (c) R eten tion req u irem en t f o r gen eral accou n ts.— In the case of a general account which would have an excess of the adjusted debit balance of the account over the maximum loan value of the securities in the account following a withdrawal of cash or securities from the account, the “ retention requirement” of a registered security (other than an exempted security), pursuant to § 220.3 ( b ) (2 ), shall be 70 percent of its current market value. SUPPLEMENT TO REGULATION U Section 221.4— SUPPLEMENT I ssued by tiie B oard of G overnors of tiie F ederal R eserve System Effective November 6, 1963 (а) M axim u m lo a n value o f stock s.— For the purpose of § 221.1, the maximum loan value of any stock, whether or not registered on a national securities exchange, shall be 30 percent of its current market value, as determined by any reasonable method. (б ) R eten tion req u irem en t.— For the purpose of § 221.1, in the case of a loan which would exceed the maximum loan value of the collateral following a withdrawal of collateral, the “ retention requirement” of a stock, whether or not registered on a national securities exchange, shall be 70 percent of its current market value, as determined by any reasonable method.