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Federal R eser v e B ank
OF DALLAS
WILLIAM H. WALLACE
f i r s t v ic e p r e s id e n t

..

...

May 14, 1986

DALLAS, TEXAS 7 5 2 2 2

The Chief Executive Officer of all
depository institutions in the
Eleventh Federal Reserve District

TO:

In July 1986, the Department of the Treasury plans to complete the
goal of issuing its marketable securities exclusively in book-entry form with
installation of the TREASURY DIRECT Book-Entry System. Following the July
1986 implementation, new issues of notes and bonds will no longer be available
in registered form. The 2-year note, to be issued in July 1986, will be the
first security to enter the TREASURY DIRECT system. Treasury bills will come
into TREASURY DIRECT beginning with the 52-week bill to be offered in January
1987.
To aid your understanding of the effect of this changing environment
on your institution and the investors you serve, a brief overview of TREASURY
DIRECT and the commercial counterpart, Treasury/Reserve Automated Debt Entry
System (TRADES), is provided below:
TREASURY DIRECT

0

TREASURY DIRECT will maintain book-entry bill, note and bond accounts
for investors separately from the current Federal Reserve commercial
book-entry system (TRADES).

°

Treasury securities in registered form will no longer be available.
However, investors desiring to maintain their own accounts directly
will be able to do so by holding a book-entry security in TREASURY
DIRECT in their own names.

°

Investors must establish an account master record for themselves in
TREASURY DIRECT before a security can be held in their names. The
account establishment can take place prior to an original issue trans­
action by requesting forms to do so directly from the Federal Reserve
Bank. Otherwise, the account master record will be established with
the original issue tender used to purchase securities.

°

A financial institution's customers who choose to hold their securities
within the book-entry accounts of that institution will continue to be
able to do so.

°

TREASURY DIRECT requires the use of electronic funds transfer for
settlements. As a result, pre-notifications through the Automated
Clearing House (ACH) on customers' accounts with financial institutions
will be passed.

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

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Treasury/Reserve Automated Debt Entry System

(TRADES)

°

The commercial book-entry counterpart to TREASURY DIRECT has been
designated as the Treasury/Reserve Automated Debt Entry System
(TRADES). TRADES is in effect the commercial book-entry system in
existence today. The system is made up of a network of entities
including the Federal Reserve Banks, financial institutions, and
dealers and brokers in government securities through which investors
may maintain and carry out book-entry security transactions.

°

Depository financial institutions submitting tenders for securities to
be held in book-entry form by the Federal Reserve will be held in
TRADES.

°

Investors purchasing securities who do not elect to maintain their own
book-entry account in TREASURY DIRECT will be required to hold their
purchases in the commercial book-entry account of a financial in­
stitution.

°

Investors who in the past have submitted tenders through your insti­
tution requesting a registered security will have two options:
1) to request the security to be held in safekeeping through the
use of your institutions commercial book-entry account. Your
institution, as the book-entry custodian, would record the
individual ownership information on its own internal records,
or
2) to submit tenders through the Treasury or local Federal Reserve
office for their own account to be held in TREASURY DIRECT.
Separately, you can obtain TREASURY DIRECT tenders from the
Federal Reserve for use by customers desiring to maintain
their book-entry accounts directly.

°

A security may be transferred between accounts in TREASURY DIRECT
or transferred from TREASURY DIRECT to TRADES or from TRADES to
TREASURY DIRECT under guidelines specified by the Department of the
Treasury. For transfers between TREASURY DIRECT accounts or to
TREASURY DIRECT accounts, an account master record must exist for the
receiving investor. Further, all TREASURY DIRECT related transfers
must be for securities eligible for inclusion in TREASURY DIRECT as
identified in the official offering circulars. It should be noted that
a transfer involving a TREASURY DIRECT Book-Entry System account cannot
be made against payment.

°

Applications for securities to be held in TRADES should be submitted on
form SEC 213 - Tender for Treasury Notes/Bonds.

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To review prior correspondence regarding both these systems, refer to this
Bank's Circular 85-156, dated December 31, 1985, covering proposed regulations
for Treasury securities to be held in the new TREASURY DIRECT Access
Book-Entry system and Circular 86-30, dated April 2, 1986, covering proposed
regulations for Treasury securities to be held in the Treasury/Reserve
Automated Debt Entry System.
For further information, please contact Tyrone Gholson (214) 651-6263 at
the Head Office; Robert W. Schultz (915) 544-4730 at the El Paso Branch; Luke
E. Richards (713) 659-4433 at the Houston Branch; or Tony G. Valencia (512)
224-2141 at the San Antonio Branch.

Sincerely,