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FEDERAL RESERVE BANK OF NEW YORK [ Circular No. 10312 "I October 18, 1989 ■ PROPOSAL TO ESTABLISH A UNIFORM DEADLINE FOR ALL THIRD-PARTY FEDWIRE FUNDS TRANSFERS Comments Invited by December 8, 1989 To A ll Depository Institutions in the Second Federal Reserve District, and Others Concerned: Following is the text of a statement issued by the Board of Governors of the Federal Reserve System: T h e F e d e r a l R e s e r v e B o a r d h a s i s s u e d fo r p u b lic c o m m e n t p r o p o s e d c h a n g e s to th e F e d w ir e f u n d s tr a n sfe r a n d b o o k - e n t r y s e c u r it ie s tr a n sfe r o p e r a tin g s c h e d u le . C o m m e n t s m u s t b e s u b m itte d to th e B o a r d b y D e c e m b e r 8 , 1 9 8 9 . T h e B o a r d is s p e c i f ic a l ly r e q u e s tin g c o m m e n t o n a p r o p o s a l to e s t a b lis h a 6 : 0 0 p .m . E a s te r n T im e (E T ) u n ifo r m d e a d lin e fo r all th ir d -p a r ty F e d w ir e f u n d s tr a n sfe r s . T h e c u r r e n t F e d w ir e o p e r a tin g s c h e d u le p r o v id e s fo r a 5 : 0 0 p .m . E T in te r d is tr ic t th ir d -p a r ty tr a n sfe r d e a d lin e . F e d e r a l R e s e r v e B a n k s h a v e th e f l e x i b i l it y to e s t a b lis h th e in tr a d istr ic t th ir d -p a r ty d e a d lin e b e t w e e n 5 : 0 0 p .m . E T a n d 6 : 0 0 p .m . ET. In a d d itio n , c o m m e n t is r e q u e s te d o n w h e t h e r r e s tr ic tin g th e la s t 15 m in u t e s o f th e f in a l h a lf - h o u r s e ttle m e n t p e r io d to f u n d s tr a n sfe r s s e n t to r e c e iv in g in s t it u t io n s fo r th e ir o w n a c c o u n t s (a n d n o t fo r th e a c c o u n t s o f r e s p o n d e n t in s t it u t io n s ) w o u ld b e d e s ir a b le to f a c ilit a te r e s e r v e a c c o u n t m a n a g e m e n t . T h e B o a r d is a ls o r e q u e s tin g c o m m e n t on: • w h e t h e r th e c lo s in g o f th e b o o k - e n t r y s e c u r it ie s w ir e in th e T w e lf t h D is t r ic t s h o u ld b e m a d e c o n s is t e n t w ith th e c lo s in g t im e o b s e r v e d in o th e r d is tr ic ts ; a n d • w h e t h e r th e F e d e r a l R e s e r v e s h o u ld e s t a b lis h u n ifo r m t im e s at w h ic h R e s e r v e B a n k s b e g in p r o c e s s i n g f u n d s a n d b o o k - e n t r y s e c u r it ie s tr a n sfe rs. T h e B o a r d b e l ie v e s th at t h e s e c h a n g e s w o u ld p r o m o te c o m p e t i t i v e e q u it y a m o n g d e p o s it o r y i n s t i tu tio n s a n d s u p p o r t e f f ic ie n t fin a n c ia l m a r k e ts. Printed on the following pages is the text of the Board’s proposal, as published in the Federal Register of October 11. Comments thereon must be submitted by December 8, and may be sent to the Board, as specified in the notice, or to Carol Barrett, Vice President, Electronic Payments Function, at this Bank. E. G erald C o r r ig a n , President. [Docket R-0876] SUPPLEMENTARY INFORMATION: Federal Reserve Bank Services Uniform Third-Party Transfer Deadline AGENCY: B o a rd o f G o v ern o rs of th e F e d e ra l R e se rv e S y stem . ACTION: R e q u e st fo r com m ent. su m m ary: T h e B o ard is req u e stin g co m m en t o n a p ro p o sa l to e s ta b lish a uniform d e a d lin e for all th ird -p arty F ed w ire fu n d s tra n sfe rs. In ad d itio n , B o ard re q u e s ts c o m m en t on w h e th e r re stric tin g th e la s t 15 m in u tes o f th e final h alf-h o u r s e ttle m e n t p erio d to fu n d s tra n s fe rs s e n t to rec eiv in g in stitu tio n s for th e ir o w n a c c o u n ts (and n o t for th e a c c o u n ts of re s p o n d e n t in stitu tio n s) w o u ld b e d e s ira b le to fac ilita te re se rv e a c c o u n t m a n a g e m e n t. T h e B oard also re q u e s ts co m m en t on (1) w h e th e r th e clo sin g o f th e b o o k -e n try se cu ritie s w ire in th e T w elfth D istric t sh o u ld b e m a d e c o n s is te n t w ith th e closing tim e o b s e rv e d in th e o th e r d istricts; a n d (2) w h e th e r th e F e d e ra l R e serv e sh o u ld e s ta b lis h u n ifo rm tim es a t w h ich R e serv e B an k s b eg in p ro ce ssin g fu n d s a n d b o o k -e n try se c u ritie s tra n sfe rs. T h e B o ard b e lie v e s th a t th e se ch a n g es w o u ld p ro m o te co m p e titiv e equity am ong d e p o s ito ry in stitu tio n s an d su p p o rt efficien t fin a n c ia l m a rk e ts. The current Fedwire operating schedule provides some level of uniformity to the closing times of the funds transfer service across Federal Reserve districts. Specifically, the schedule provides for an interdistrict third-party transfer deadline of 5:00 p.m.1; and an intradistrict and interdistrict bank-to-bank transfer 2 deadline of 6:30 p.m. This schedule gives Federal Reserve Banks the flexibility to permit depository institutions to send intradistrict third-party transfers as late as 6:00 p.m., which results in disparities between the intradistrict and interdistrict third-party transfer deadlines in some districts. Five districts have intradistrict third-party transfer deadlines of either 5:30 p.m. or 6:00 p.m., thereby permitting institutions, within their districts to exchange thirdparty transfers after the uniform 5:00 p.m. interdistrict third-party transfer closing. The table below shows the current closing times for the Fedwire funds transfer service. C u r r e n t F e d w ir e F u n d s date: C om m ents m u st b e su b m itte d on or b efo re D ecem b er 8,1989. ADDRESS: C om m ents, w h ich sh o u ld refer to D ocket No. R-0676, m ay b e m a ile d to the B oard of G o v ern o rs o f th e F e d e ra l R eserv e S ystem , 20th a n d C S tre ets, N W ., W ash in g to n , DC 20551, A tte n tio n : Mr. W illiam W . W iles, S ecre tary ; o r m ay b e d eliv ered to R oom B-2223 b e tw e e n 8:45 a.m . a n d 5:00 p.m . A ll co m m en ts re c e iv e d a t th e a b o v e a d d re ss w ill b e in clu d ed in th e p u b lic co m m en ts file, a n d m ay b e in sp e c te d in R oom B 1122 b e tw e e n 9:00 a.m . a n d 5:00 p.m. FOR FURTHER INFORMATION CONTACT: For info rm atio n reg a rd in g F ed w ire fu n d s tra n s fe r o p era tin g h o u rs, c o n ta c t B ruce J. Sum m ers, A sso c ia te D irec to r (202/4522231), L ouise L. R o sem an , A s s is ta n t D irecto r (202/452-3874), o r T in a G. S later, S enio r F in a n c ia l S erv ices A n a ly s t (202/452-2539), D ivision of F ed era l R eserv e B ank O p e ra tio n s. F or in fo rm atio n reg a rd in g F ed w ire booke n try secu ritie s tra n s fe r o p era tin g hours, c o n ta c t B ruce J. S um m ers, A sso c ia te D irecto r (202/452-2231), G e ra ld D. M an y p en n y , M a n a g e r (202/452-3954), or L isa H oskins, S en io r F in a n c ia l S erv ice s A n a ly s t (202/452-3437), D iv isio n of F e d e ra l R eserv e B ank O p e ra tio n s. F or th e h earin g im p a ired only: T eleco m m u n ic atio n s D evice fo r the D eaf, E a m e stin e H ill o r D o ro th ea T h o m p so n (202/452-3544). transfer C l o s in g T im e s [Eastern Time] Third-party transfers District Interdistnct Boston................. 5:00 p.m New York............. Philadelphia.......... Cleveland............ u N 1 F 0 6:00......... S t Louis ............. 5:00......... c L 0 S 1 5:00......... G 5:00......... 5:00......... N Minneapolis.......... 1 F o R 5:00......... M c L 0 S 1 Chicago................ U N 6 .0 0 ......... M Atlanta................ Settlement transfers 5:30 p.m... 6:30 p.m. 6:00......... F Richmond.......... Intradistrict N G Kansas City_____ T 5:00......... T D allas.-................ 5:00....... 1 1 M E M E San Francisco___ 6:00......... The Board proposes to establish a uniform 6:00 p.m. deadline for the processing of all third-party Fedwire 1 All times referenced in this notice are Eastern Time, unless otherwise specified 1 Bank-to-bank transfers are transfers that do not involve a non-depository institution third party either as sender or beneficiary. funds tra n sfe rs.3 A n u m b e r of d ep o sito ry in stitu tio n s h a v e in d ic a te d th a t la te r in tra d istric t th ird -p a rty tra n sfe r d ea d lin e s in som e p a rts o f the n atio n h a v e led to a rtificial re stric tio n s on th e flow of fu n d s th a t p u t th em a t a com petitive d isa d v a n ta g e . F or ex am p le. S eco n d D istrict in stitu tio n s co n tin u e to orig in ate an d receive^ th ird -p arty tra n sfe rs am ong th e m se lv es to talin g ap p ro x im ate ly $60 billion a fte r th e close of in te rd istric t th ird -p arty tra n sfe r traffic, b u t in stitu tio n s in o th e r d istric ts are p rec lu d ed from e x ch an g in g thirdp a rty tra n sfe rs w ith N ew Y ork in stitu tio n s. S ince N ew Y ork is the n atio n ’s m o st a c tiv e m o n ey ce n te r, som e in stitu tio n s in o th e r d istric ts p erc eiv e th eir in ab ility to p a rtic ip a te in th e N ew Y ork m a rk e t on th e sam e b a s is a s S econd D istrict in stitu tio n s a s a significant co m p etitive d isa d v a n ta g e . T his p ro p o sed c h a n g e sh o u ld re d u c e com petitive in eq u ity am ong d e p o sito ry in stitu tio n s by elim inating the d istin c tio n b e tw e e n in te rd istric t a n d in tra d is tric t th ird -p a rty tra n sfe rs. W e st C o a st d e p o s ito ry in stitu tio n s v ie w th e c u rre n t th ird -p a rty in te rd istric t d e a d lin e a s e sp e c ia lly restric tiv e , b e c a u s e it o cc u rs re la tiv e ly ea rly in th eir b u sin e ss d ay . A un iform 6:00 p.m. thirdp a rty tra n s fe r d e a d lin e w o u ld p ro v id e W e st C o a st in stitu tio n s, w h ic h to d a y m u st c o m p e te p ro c e ssin g of in te rd istric t th ird -p a rty tra n s fe rs b y 2:00 p.m. P acific T im e, w ith a d e a d lin e th a t is m ore c o n s iste n t w ith th e b u s in e s s d a y in the P acific tim e zone. F u rth er, e x p a n d in g th e in te rd istric t th ird -p a rty tra n s fe r p ro ce ssin g h ours sh o u ld re s u lt in a re d u c tio n in the n u m b e r o f e x te n sio n s to th e th ird -p arty d e a d lin e , sin c e m ore tim e w o u ld b e a v a ila b le to h a n d le p e a k v o lu m es a n d to re c o v e r from m id d a y o u tag es. F inally, sta n d a rd iz in g th e F ed w ire th ird -p arty tra n s fe r d e a d lin e n a tio n w id e w o u ld fa c ilita te th e o p e ra tio n s o f ban k in g o rg a n iz a tio n s th a t h a v e offices a c ro ss F e d e ra l R e se rv e d istric t b o u n d a rie s. W h ile th e re a re c le a r b e n e fits to this p ro p o sal, a la te r th ird -p a rty tra n s fe r d e a d lin e c o u ld a d v e rs e ly a ffec t re se rv e a c c o u n t m a n a g e m e n t a n d re su lt in in c re a se d e x te n sio n s o f th e final F e d w ire clo se. T o d ay , in stitu tio n s in se v e n d is tric ts h a v e o n e a n d o n e-h a lf h o u rs b e tw e e n th e c lo se o f b o th th e * * The objective of this proposal is to achieve consistency across Federal Reserve districts with respect to the Fedwire funds transfer third-party transfer deadline. Board and Reserve Bank staff are conducting a longer-term study to assess whether further modifications to Fedwire operating hours are required based on the continuing evolution of the payments system and financial markets. The proposals discussed in this notice do not anticipate the results of this study. 2 PRIN TED IN NEW YORK. FROM FEDERAL REGISTER, Vol. 54, No. 195, pp. 41681-41683. in te rd istric t a n d in tra d is tric t th ird -p a rty w ire a n d th e fin al 6:30 p.m . F ed w ire close in w h ich to c a lc u la te a n d a d ju st re se rv e p o sitio n s. By e x te n d in g th e d e a d lin e fo r in te rd istric t th ird -p a rty tra n sfe rs, th e se ttle m e n t p e rio d 4 for d e p o sito ry in stitu tio n s in th e se se v e n d istric ts w o u ld b e re d u c e d to o n e-h a lf hour. A n u n a n tic ip a te d la s t m inute re c e ip t o f a th ird -p a rty tra n s fe r could co m p lic ate re se rv e a c c o u n t m a n ag e m en t by c o n trib u tin g to a re se rv e ex c ess. T he n e e d to a d ju s t to su c h la s t m inute ch a n g es in p o sitio n co u ld re su lt in m ore fre q u en t re q u e s ts for e x te n sio n s o f the fin al F ed w ire closing tim e. M oreover, given th e n a rro w e r s e ttle m e n t w in d o w , a n y e x te n sio n o f th e th ird -p a rty d e a d lin e w o u ld a lw a y s re s u lt in an e x te n sio n o f th e fin al F e d w ire closing tim e, in o rd e r to p r o v id i a 30 m in u te b a n k -to -b a n k se ttle m n t p erio d . E x te n sio n s req u ire a d d itio n a l o p e ra tio n a l su p p o rt a n d m a n a g e m e n t a tte n tio n a n d a re co stly to b o th R e serv e B anks a n d d e p o s ito ry in stitu tio n s. In a d d itio n , a la te r in te rd is tric t th ird p a rty tra n s fe r d e a d lin e c o u ld re su lt in rev ise d p a tte r n s of fu n d s tra n s fe r v olum e th a t w o u ld re s u lt in so m e in stitu tio n s receivin g tra n sfe rs la te r in the day. In five F e d e ra l R e serv e d istricts, d ep o sito ry in stitu tio n s c a n sen d funds tra n sfe rs to in -d istric t receiving in stitu tio n s a fte r th e clo se o f the in te rd istric t th ird -p a rty w ire. C onsequently, a n u m b e r of in stitu tio n s in th ese d istric ts, inclu d in g th e la rg e N ew Y ork b an k s, c u rre n tly m a n ag e outgoing th ird -p arty tra n sfe rs in th e la te aftern o o n so th a t th e ir in te rd istric t tran sfers a re s e n t p rio r to th e 5:00 p.m. d eadline, w ith the rem a in in g tra n sfe rs sen t p rior to the d istric t's la te r in tra d istrict d ea d lin e . If th e F e d e ra l R eserve a d o p ts a un ifo rm th ird -p a rty tran sfe r d ea d lin e , th e re w o u ld no lo n g er be a re a so n to assig n p rio rity to in te rd istrict tra n sfe rs, w ith th e re su lt th a t som e in stitu tio n s co u ld re c e iv e tran sfe rs from c e rta in o u t-o f-d istrict in stitu tio n s la te r th a n th e y g e n e ra lly receive th e se tra n sfe rs to d a y . A lthough the p ro p o se d th ird -p a rty d ead lin e w o u ld req u ire R e serv e B an k s to p rovide funds tra n sfe r se rv ic e s la te r in the day, the p ro p o sa l w o u ld n o t require d ep o sito ry in stitu tio n s to re m a in open for funds until 6:00 p.m. In stitu tio n s in d istricts th a t cu rren tly h a v e e a rlie r th ird -p arty d ea d lin e s, h o w ev e r, m a y feel obligated to e x te n d th e ir in te rn a l operating h o u rs in o rd e r to p o st incom ing tra n sfe rs to th e ir c u s to m e rs’* * The settlement period is used for bank-to-bank settlemnt transfers, including correspondent/ respondent transfers as well as transfers between banks on their own betiaif. ac co u n ts on a tim ely b a s is a n d to fac ilita te th e ir re se rv e a c c o u n t m an ag em en t. In o rd er to a c h ie v e th e b e n e fits o f the p ro p o sed c h a n g e s to th e F ed w ire o p eratin g h ours, w h ile b ein g se n sitiv e to its p o te n tia l a d v e rse effects, th e B o ard p ro p o ses th a t th e n e w d e a d lin e , if ad o p ted , b e im p lem e n te d in tw o p h a se s. D uring a six m o n th tra n sitio n , th e n atio n w id e in te rd istric t th ird -p a rty d ea d lin e w o u ld b e e x te n d e d from 5:00 p.m. to 5:45 p.m., a n d d istric ts w ith a n in tra d istric t th ird -p a rty tra n sfe r d ea d lin e e a rlie r th a n 5:45 p.m . w o u ld m ove th e ir d e a d lin e to th a t tim e. D istricts th a t n o w h a v e a n in tra d istric t th ird -p arty d e a d lin e o f 6:00 p.m. w o u ld m a in ta in th is d e a d lin e du rin g th e tran sitio n perio d . Six m o n th s follow ing the im p lem en tatio n o f th e tra n sitio n p h ase, the F e d e ra l R e serv e B an k s w o u ld e sta b lish a 6:00 p.m . un ifo rm in te rd istric t a n d in tra d istric t th ird -p a rty d e a d lin e , u n less ex p e rien c e sh o w e d th a t th e la te r th ird -p arty tra n sfe r d e a d lin e w o u ld h in d e r re se rv e a c c o u n t m a n ag e m en t, resu lt in a sig n ific an t in c re a se in req u e sts to e x te n d th e final F ed w ire closing tim e, o r o th e rw ise sig n ific an tly d isru p t d ep o sito ry in stitu tio n s’ o p eratio n s. T he B oard re q u e sts co m m en t on w h eth e r a 60-day p e rio d from fin al a d o p tio n of th e re v ise d third -p arty d e a d lin e s to th e im p lem en tatio n o f the six -m o n th tra n sitio n p h ase w ould p ro v id e a d e q u a te le ad tim e for d ep o sito ry in stitu tio n s. In addition, the B o ard re q u e sts com m ent on w h e th e r a six -m o n th tra n sitio n perio d is su fficien t to d eterm in e w h e th e r the la ter thirdp a rty d e a d lin e w o u ld h av e any a d v e rse effects. F inally, if ex p e rien c e during the tra n sitio n p h a s e in d ic a te s th at a 6:00 p.m. th ird -p a rty d e a d lin e w ould be d isru p tiv e to d ep o sito ry in stitu tio n s’ o p era tio n s, th e B oard req u e sts com m ent on w h e th e r a uniform 5:45 p.m. in tra d istric t a n d in te rd istrict d e a d lin e sh o u ld b e esta b lish e d , or w h eth er d istric ts w ith 6:00 p.m. in tra d istrict d e a d lin e s sh o u ld b e p erm itted to re ta in th e se la te r d ea d lin e s. S e g m e n te d S e ttle m e n t P e rio d S om e d e p o sito ry institutions h a v e su g g ested th a t a m ore orderly se ttle m e n t of en d -o f-d ay re se rv e positions co u ld b e fac ilitate d , e sp ec ially in connection w ith a la te r in te rd istric t third -p arty tra n sfe r d ea d lin e , by restrictin g the la st 15 m in u tes of th e final o n e-half hour se ttle m e n t p erio d to tran sfe rs se n t to receiv in g in stitu tio n s for their ow n a c c o u n ts (an d n o t for the accounts o f re sp o n d e n t in stitu tio n s). T ran sfer re c e iv e d b y a n in stitu tio n for its o w n 3 a c c o u n t a re g en e rally kn o w n to the in stitu tio n in ad v a n ce . W h e reas an in stitu tio n c a n co n tro l the tim ing o f tra n sfe rs se n t o n b e h a lf of resp o n d e n t in stitu tio n s b y estab lish in g a d e a d lin e for th e se tra n sfe rs prior to the F ed w ire closing tim e, la s t m inute transfers re c e iv e d on b e h a lf of resp o n d en t in stitu tio n s m a y n o t b e an ticip ated or c o n tro lle d by th e receiving c o rre sp o n d e n t institution, com plicating th e c o rre sp o n d e n t's rese rv e account m a n a g e m e n t R estricting tran sfers th a t a re se n t d u rin g the la st 15 m inutes of F e d w ire o p e ra tio n s to those for w h ich th e receiv in g account-holding in stitu tio n , a n d n o t its re s p o n d e n t is the b e n e fic ia ry co u ld fac ilita te the receiving in stitu tio n ’s re se rv e acco u n t m a n a g e m e n t S egm enting the se ttle m en t p e rio d in to tw o p a rts m ay require n ew fu n d s tra n s fe r ty p e co d es and o perating ch a n g e s b y b o th d ep o sito ry in stitu tio n s a n d th e R e serv e Banks. T h e B o ard re q u e sts com m ent on the b e n e fits o f a se g m en ted se ttlem ent p erio d , a s w e ll a s an y ad v e rse effects it m a y h a v e o n in stitu tio n s th at m a in ta in b a la n c e s a t c o rre sp o n d e n ts. In ad d itio n , th e B o a rd re q u e sts com m ent on w h e th e r, if a se g m en ted settlem en t p e rio d w e re d e sira b le , th e la st 15 m in u tes b e fu rth e r restric ted to ex clu d e tra n sfe rs o rig in a te d by a n in stitution on b e h a lf o f a re sp o n d e n t. S o m e b a n k s h a v e in d ic a te d th a t b e c a u s e com petitive p re ssu re w o u ld p re c lu d e them from im p o sin g a d e a d lin e for th e o rigination of tra n sfe rs on b e h a lf o f re sp o n d e n ts th a t is e a rlie r th a n th e F e d w ire d eadline, th e a d v a n ta g e s o f a se g m e n ted se ttle m e n t p e rio d w o u ld n o t b e realized w ith o u t re stric tio n s on b o th the o rig in a tio n a n d re c e ip t o f re sp o n d e n t tra n sfe rs. If a se g m e n te d s e ttle m e n t p erio d w ere a d o p te d , th e B o a rd re q u e s ts com m ent on w h e th e r it sh o u ld b e im p lem en ted c o n c u rre n t w ith th a t 6:00 p.m. thirdp a rty d e a d lin e ; th a t is, a fte r th e sixm o n th tra n sitio n p h a se , o r w h e th e r an a lte rn a te im p le m e n ta tio n sc h ed u le w o u ld b e p re fe ra b le . F in ally, th e B oard re q u e s ts c o m m en t on h o w th e F ed eral R e serv e sh o u ld m a n a g e e x te n sio n s of th e F ed w ire fin al clo sin g tim e u n d er a se g m e n te d se ttle m e n t p erio d , e.g., sh o u ld e x te n sio n s o f th e final closing tim e in v o lv e d isc re te e x te n sio n s of th e tw o se g m e n te d p erio d . Book-Entry Securities Closing Time C u rren tly , th e b o o k -e n try secu ritie s tra n s fe r w ire is sc h e d u le d to close n a tio n w id e a t 2:30 p.m . for in te rd istric t a n d in tra d is tric t tra n sfe rs, a t 2:45 p.m. for d e a le r tu rn a ro u n d , a n d a t 3:00 p.m. for re v e rs a l tr a n s a c tio n s .* T h e T w elfth * D istrict re m a in s op en , h o w e v e r, for in tra d is tric t tra n s fe r u n til 5:30 p.m., w ith a 6:00 p.m . c lo se for in tra d is tric t re v e rsa ls. T h e se la te r o p e ra tin g hours a re m o re c o n s is te n t w ith W e s t C o a st b u s in e s s ho u rs, a n d e n a b le T w elfth D istric t in stitu tio n s to tra n s fe r booke n try s e c u ritie s a m o n g th e m se lv e s afte r th e s e c u ritie s tra n s fe r sy ste m is clo sed fo r th e re s t o f th e c o u n try . T h e d o lla r v olum e o f T w e lfth D istric t se cu ritie s tra n s fe rs p ro c e s s e d a fte r th e ac tu a l n a tio n a l clo sin g tim e is re la tiv e ly in s ig n ific a n t T h e B o a rd re q u e sts co m m en t on w h e th e r th e la te r T w elfth D istric t clo sin g tim e s c re a te co m p etitiv e in e q u itie s w ith in stitu tio n s in o th e r d istric ts; w h e th e r th e clo sin g o f the b o o k -en try se c u ritie s tra n sfe r sy stem sh o u ld b e un ifo rm n a tio n w id e ; a n d if so, w h a t th e im p a c t o f a n e a rlie r in tra d is tric t c lo sin g tim e w o u ld b e o n T w e lfth D istric t in stitu tio n s. Current F edw ire O pening T imes [Eastern Time] District Boston........................ New York................... Philadelphia..... Cleveland _. Richmond._ _ ....... Atlanta_______ ____ Chicago________ _ _ St. Louis..................... Minneapolis................ Kansas City________ Dallas............... ........ San Francisco............ Funds Transfer Book-Entry Securities Transfer 8 00 a m 8 CO-8.30....... 8:00-8:30 8:15-8:30 ._ .. 8:00-8:45 • 8:00___ ____ 8:00 8:30............. 8:30 ‘ 8:30................ 7:45-8:00 8:00-9:00___ 8:45-9:00 8:30 .............. 9:00 9 0 0 ............... 8' 15-8-30 9:00 ________ .9:00 9:00................ 9:00 9:00................ : 10:00 • • Philadelphia opens at 8:00 a.m. for intradistrict securities transfer processing,, and at 8:45 a.m. for interdistrict securities transfer processing. ‘ The Charlotte Branch opens at 8.00 a.m. for securities transfer processing. cThe San Francisco Head Office and the Salt Lake City Branch open at 10:00 a.m. for securities transfer processing: the Portland; SeatUe; and Los Angeles Branches open at 11:00 a.m. for securities transfer processing. Uniform Opening Time T h e B o ard ’s re c e n t p ro p o sa l to p ric e d a y lig h t o v e rd ra fts * m a y h a v e im plications for F e d w ire o p en in g tim es. T h e F edw ire fu n d s tra n sfe r o p era tin g sc h ed u le cu rren tly p ro v id e s th a t e a c h d istric t open for p ro c e ssin g no la te r th an 9:00 a.m .; eight d istric ts b eg in fu n d s tra n sfe r o p era tio n s b e tw e e n 8:00 a.m . a n d 8:45 a.m. T he o p e n in g tim es fo r th e F e d e ra l R eserv e’s b o o k -e n try se c u ritie s se rv ic e are e v e n m ore d isp a ra te , ranging from 7:45 a.m. to 11:00 a.m . T h e cu rre n t opening tim es for th e fu n d s tra n sfe r a n d bo o k -en try se c u ritie s tra n sfe r se rv ic es a re show n in the ta b le b elo w . D ifferences in F e d w ire o p en in g tim es am ong R eserve B a n k s m a y in h ib it th e efficient m ovem ent o f fu n d s, e sp e c ia lly in a n enviro n m en t w h e re in tra d a y b a la n c e s h av e re a l e c o n o m ic v a lu e . For exam ple, if the B o a rd ’s re c e n t p ro p o sa l to p rice daylight o v e rd ra fts is a d o p te d , it • These closing times are routinely extended to accommodate peak afternoon securities transfer volume. The actual average reversal closing time to date in 1989 Is 4:20 pjn. This proposal would not affect the Federal Reserve** book-entry securities' transfer extension policy. * See 54 FR 28094, Jams 21. I960. is p o ssib le th a t in stitu tio n s m a y c o n tra c t to b u y a n d retu rn F e d e ra l fu n d s a t sp ecified tim es d u rin g th e d ay . In asm u c h as th e m a rk e t for F e d e ra l fu n d s is a n a tio n a l m a rk e t, d iffe re n c e s in F ed w ire opening tim es co u ld artific ally c o n stra in p riv a te co n tra c tin g am ong buyers a n d se lle rs of F e d e ra l funds. O n a m ore te c h n ic a l le v el, u n d e r the B o ard ’s proposal, p ricin g w o u ld a p p ly to av e ra g e daylight o v e rd ra fts, w h ic h w o u ld b e c a lc u la te d u sin g th e p e rio d of tim e th a t F edw ire is o pen. T hus, d ifferen ces in o p e ra tin g h o u rs a c ro ss F e d e ra l R eserve d istric ts co u ld re su lt in d ifferen ces in th e fee a s s e s s e d fo r a given q u an tity of d ay lig h t o v e rd ra fts. A n objective o f th e B o a rd ’s re c e n t p ro p o sa l regarding th e m e a su re m e n t o f in tra d a y rese rv e a n d c lea rin g a c c o u n t b a la n c e s is to e lim in a te F e d e ra l R e serv e in tra d a y f lo a t N a tio n a l u n ifo rm ity in F ed w ire o p e ra tin g h o u rs su p p o rts this o b je c tiv e b e c a u s e d iffe ren t open in g tim es am o n g R eserv e B anks ca n co n trib u te to in tra d a y F ed era l R e serv e float. A cc o u n ts of in stitu tio n s o rig in atin g fu n d s or b o o k -en try 4 se c u ritie s tra n sfe rs a re d eb ited o r c re d ite d a t th e tim e the originating in stitu tio n ’s R e serv e B ank p ro c e sse s th e tra n sfe r. If th e receiv ing R e serv e B ank h a d n o t y e t b eg u n p ro cessin g for the d ay , th e o ffsettin g e n try to the ac co u n t o f th e rec eiv in g in stitu tio n w o u ld not b e p o ste d u n til th a t R e serv e Bank p ro c e sse s th e tran sfe r, cre atin g F ed eral R e serv e in tra d a y cre d it flo at (in the ca se of fu n d s tra n sfe rs) or d e b it float (in the c a se o f b o o k -en try secu ritie s tran sfers). E sta b lish m e n t of uniform opening, as w ell a s closing, tim es w o u ld red u c e the am o u n t o f in tra d a y flo at g e n e ra te d by th e F e d e ra l R e se rv e ’s F ed w ire serv ices. F ive F e d e ra l R e serv e d istric ts c u rre n tly s ta rt b o o k -en try se cu ritie s tra n sfe r p ro ce ssin g e a rlie r th a n funds tra n sfe r p ro cessin g . If the B o ard p rices b o o k -en try se c u ritie s d ay lig h t o v e rd ra fts a n d in c lu d es th e se o v e rd ra fts w ith in a n in stitu tio n ’s n e t d e b it cap , d e p o sito ry in stitu tio n s m ay se e k to av o id incurring a d ay lig h t o v e rd ra ft from th e p u rc h a se o f a b o o k -en try se cu rity b y arran g in g for co v erin g fu n d s p rio r to th e re c e ip t of the incom ing secu rity . A uniform opening tim e for th e fu n d s tra n s fe r a n d se cu ritie s tra n sfe r se rv ic es, o r a uniform booke n try se c u ritie s tra n sfe r open in g tim e, th a t is slig h tly la te r th a n th a t for th e fu n d s tra n s fe r se rv ic e, w o u ld p ro v id e in stitu tio n s th e o p p o rtu n ity to fund th eir a c c o u n ts to co v e r a n tic ip a te d se cu ritie s p u rc h a se s. T h e B o ard re q u e sts com m ent on w h e th e r th e F ed era l R eserv e sh o u ld a d o p t a uniform opening h o u r o f 8:30 a.m. for the F ed w ire funds an d booke n try se c u ritie s tra n sfe r serv ices, or w h e th e r th e b o o k -en try se c u ritie s tra n s fe r se rv ic e o p en ing tim e sh o u ld b e la te r th a n th a t for th e fu n d s tra n sfe r serv ice. In a d d itio n , th e B o ard re q u e sts co m m en t on w h e th e r th e re a re re a so n s o th e r th a n th e B o ard ’s risk red u ctio n p ro p o sa ls to e s ta b lish uniform funds a n d se c u ritie s tra n s fe r open in g tim es. By order of the Board of Governors of the Federal Reserve System, October 4,1989. William W. WUes, Secretary o f the Board. [FR Doc. 89-23904 Filed 10-10-89; 8:45. am) B ILLIN G CO O € &210-01-M
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