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FEDERAL RESERVE BANK OF NEW YORK C Circular No. 1287, September 28, 1933T Supplementing Circular No. 922, r Dated July 11, 1929 J Date for Delivery of Securities To all Member Banks in the Second Federal Reserve District: With respect to the delivery of securities, either direct or through the Stock Clearing Corporation, by this bank for account of member banks, and supplementing our Circular No. 922, dated July 11, 1929, member banks are requested, when authorizing this bank to deliver securities, to give the specific date on which such deliveries are to be made under the new Two-Day Delivery Plan of the New York Stock Exchange, which became effective on September 8, 1933. The plan is briefly summarized in a statement issued by the New York Stock Exchange on August 31, 1933, a copy of which is printed on the following pages. GEORGE L. HARBISON, Governor. Two-Day Deliveries New York Stock Exchange August 31,1933. In view of the fact that the Two-Day Delivery Plan is to go into effect on September 8, 1933, this statement is issued for the purpose of avoiding any misunderstanding or confusion that might result from the change in the method of trading, clearance and delivery. The plan may be briefly summarized as follows: Contracts made ''Regular Way," instead of being settled on the next full business day following the day on which the transactions were entered into will be settled on the second full business day. In other words, Monday's transactions will be settled on Wednesday, Tuesday's transactions will be settled on Thursday, Wednesday's transactions will be settled on Friday, Thursday's transactions will be settled on Monday of the following week, and Friday's and Saturday's transactions will be settled on Tuesday of the following week. A holiday intervening between the day of the transaction and the settlement day will postpone the settlement by one day. Thus, if a transaction were made on Monday, and either Tuesday or Wednesday were a holiday, settlement would be made on Thursday instead of Wednesday. Tickets will continue to be exchanged and comparisons made on the day of the transaction. However, Clearing House sheets will be prepared on the morning of the first succeeding full business day following the day of the transaction instead of the same day as heretofore. In preparing the amendments to the Rules of the Governing Committee necessary to put the plan into effect, advantage was taken of the opportunity, not only to clarify existing rules, but also to simplify as much as possible the rules governing different types of contracts. "REGULAKWAY." Transactions made without specification will be assumed to be "Regular Way," i. e., for delivery on the second full business day following the day of the transaction. "SECOND DAY." The form of contract heretofore designated as "Xext Day" is to be changed to "Second Day," to conform to the plan. Bonds sold in this way will be deliverable on the second full business day following the day of the transaction. " A T THREE DAYS." This form of contract has been eliminated entirely. It was felt that as the normal delivery day on "Regular Way" contracts is extended by one full business day under the new method, the usefulness of this type of contract would be considerably reduced. "SELLER'S OPTION." To compensate for the elimination of contracts "At Three Days," the provisions concerning "Seller's Option" contracts have been changed so that those securities which could heretofore be dealt in "At Three Days" and "Seller's Option" for not less than four days, may be dealt in "Seller's Option" for not less than three days. Under the provisions of the revised rules, a contract made "Seller's Three" will be practically the equivalent of a contract made "At Three Days." It is hoped that many difficulties arising out of the differences between the terms of contracts "At Three Days" and "Seller's Option" will thus be avoided. "SELLER'S OPTION" AND "DELAYED DELIVERY." Heretofore there have existed a number of confusing differences between "Seller's Option" contracts and "Delayed Delivery" contracts. These have been eliminated as far as possible, so that when the plan becomes effective, the following items which heretofore have been treated differently with respect to the two types of contract, will be treated in the same way: 1. Bond interest will be computed until the second full business day following the day of the transaction. 2. Notice of intention to deliver prior to the final date must be given at or before 4:00 p. m. of the preceding full business day or 1:00 p. m. on a half-holiday. 3. When the final expiration date occurs on a holiday or half-holiday, delivery will be due on the next succeeding full business day. Nevertheless, a few differences between the two types of contract will continue to exist, and to these specific attention is directed: 1. In the case of a contract made "Delayed Delivery" the seller will have the option of making delivery prior to the seventh day, upon giving the buyer written notice on or after the second business day following the day of the transaction, while in the case of a contract made "Seller's Option," such notice may not be given until the second full business day following the day of the transaction. Therefore, in the case of a "Delayed Delivery" contract made on Thursday, it will be possible to give notice on Saturday, for delivery Monday, whereas in the case of a "Seller's Option" contract made on Thursday, notice may not be given until Monday of the following week, for delivery on Tuesday. 2. No change has been made in the rule heretofore existing, that service of notice of intention to deliver part of the securities involved in a contract automatically makes the entire contract due, nor in the provision of the rules under which the buyer may not be compelled to accept partial delivery of securities sold "Delayed Delivery" if tendered within the seven-day period, but must accept a partial delivery of securities sold "Seller's Option" if tendered within the time limit designated in the option. "BUYER'S OPTION." This form of contract has been entirelv eliminated. UNITED STATES GOVERNMENT BONDS. In order to facilitate trading in United States Government Bonds for delivery on the first full business day following the day of the transaction, a special form of contract has been provided for this class of securities only, namely, "Next Day." Unless "Next Day" is specified at the time of entering an order in such bonds, it is to be assumed that the order is to be executed "Regular "Way," i. e., for delivery on the second full business day following the day of the transaction. Interest on United States Government bonds sold "Next Day" is to be computed up to but not including the first full business day following the day of the transaction. HOLIDAYS AND HALF-HOLIDAYS. Under the new rules, all contracts falling due on holidays or half-holidays will mature on the next succeeding full business day, thus eliminating the confusion that has heretofore existed in having some mature on the preceding full business day and others on the succeeding full business day. INTEREST. On all transactions in bonds dealt in "and interest," (except transactions made for "Cash" and transactions made "Next Day" in United States Government Bonds), accrued interest is to be computed up to but not including the second full business day following the day of the transaction. The language of some rules regarding interest on bonds (though not directly affected by the two-day delivery feature) have been re-written with a view toward clarification. LOANS. Unless otherwise specified, loans of securities will be deliverable on the second full business day following the day of the loan. Notice for the return of loans of cleared securities must be given before 3:45 P.M. on any full business day or before 12:45 P.M. on any business day which is a half-holiday for settlement on the second succeeding full business day. EX-DIVIDENDS, EX-RIGHTS, ETC. Unless the Committee on Securities rules otherwise, stocks will sell " e x " on the full business day preceding the record date, except that when the record is taken on a holiday or halfholiday they will sell " e x " on the second preceding full business day. "Cash" transactions made on the " e x " date and to and including the record date will carry the dividend or rights. ASHBEL GREEN, Secretary.
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