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FEDERAL RESERVE BANK OF NEW YORK Circular No. [ ] 6680 January 28, 1971 I P R O P O S E D A M E N D M E N T S T O M A R G IN R E G U L A T IO N S T A N D U " B l o c k P o s i t i o n e r s " and " T h i r d - M a r k e t M a k e r s " E x e m p tio n s To A ll Banks, Brokers and D ealers, and Members o f National S ecu rities E xchanges, in the Second Federal R eserv e D istrict: F o llo w in g i s th e te x t o f a s t a te m e n t is s u e d J a n u a ry 26 by the B o a r d o f G o v e r n o r s o f the F e d e r a l R e s e r v e S y ste m : T h e B o a r d o f G o v e r n o r s o f th e F e d e r a l R e s e r v e S y ste m to d a y is s u e d f o r c o m m e n t a p r o p o s a l to e x e m p t f r o m m a r g in r e q u ir e m e n t s c r e d i t e x te n d e d b y b a n k s , b r o k e r s , and d e a le r s to s o - c a l l e d " b l o c k p o s i t i o n e r s . " T h e B o a r d fix e d M a r c h 17 a s th e d e a d lin e f o r the r e c e i p t o f c o m m e n t . B lo c k p o s i t i o n e r s a r e s e c u r i t i e s f i r m s that sta n d r e a d y to h o ld su b s ta n tia l b lo c k s o f s t o c k f o r t h e ir ow n a c c o u n t to fa c ili t a t e the s a le o r p u r c h a s e b y t h e ir c u s t o m e r s — p r i m a r i l y in s titu tio n s — o f q u a n titie s o f s t o c k t o o la r g e to b e a b s o r b e d by o r d in a r y tr a d in g m e c h a n is m s . T h e m in im u m b l o c k o f s t o c k that c o u ld q u a lify f o r the p r o p o s e d e x e m p tio n w ou ld h ave a m a r k e t v a lu e o f $ 2 0 0 ,0 0 0 . A b l o c k w ou ld a l s o h a v e to b e s o ld b y th e b l o c k p o s it io n e r s w ith in 15 b u s in e s s d a y s , alth ou g h l i m i t e d e x t e n s io n s o f 5 d a y s at a tim e c o u ld b e a llo w e d b y the s t o c k e x c h a n g e s and the N a tion al A s s o c ia t io n o f S e c u r it ie s D e a le r s . T h e B o a r d a l s o r e - i s s u e d f o r fu r t h e r c o m m e n t a p r o p o s a l to e x e m p t s o - c a l l e d " t h i r d m a r k e t m a k e r s " f r o m m a r g in r e q u ir e m e n t s f o r c r e d i t th ey ob ta in f r o m b a n k s to c a r r y on t h e ir m a r k e t m a k in g a c t iv it y . T h ir d m a r k e t m a k e r s a r e f i r m s th at m a k e a m a r k e t o f f th e e x c h a n g e s in s t o c k s th at a r e lis t e d f o r e x c h a n g e tr a d in g . T h e n ew p r o p o s a l s w ou ld s u b je c t c r e d i t f o r b l o c k p o s it io n in g a c t i v it ie s b y a ll m a r k e t m a k e r s to the s a m e r e s t r i c t i o n s a s th o s e on b l o c k p o s i t i o n e r s . T h e r e s t r i c t i o n s w ou ld a p p ly to s p e c i a l i s t s , to o v e r - t h e - c o u n t e r f i r m s that m a k e a m a r k e t in O T C M a r g in S to c k s , and to th ir d m a r k e t m a k e r s . If any o f th e s e f i r m s to o k a s in g le p o s it io n w ith a m a r k e t v a lu e o f $ 2 0 0 ,0 0 0 o r m o r e , the b lo c k w o u ld h a v e to be s o ld w ith in 15 b u s in e s s d a y s , o r th e c r e d i t w ou ld c e a s e to b e e lig ib le f o r e x e m p tio n . T h e s a m e lim it e d e x t e n s io n s o f tim e c o u ld b e a llo w e d , h o w e v e r . P r in t e d b e lo w is the te x t o f the p r o p o s e d a m e n d m e n ts . C o m m e n ts th e r e o n sh o u ld b e s u b m itte d by M a rch 17 and m a y b e se n t to o u r C o n s u m e r I n fo r m a tio n and S e c u r it ie s R e g u la tio n s D e p a r tm e n t, o r d ir e c t ly to the B o a r d o f G o v e r n o r s w ith c o p i e s to th is B ank. A d d itio n a l c o p i e s o f th is c i r c u l a r w ill b e fu r n is h e d upon r e q u e s t. A l f r e d H a y es, P r e s id e n t . (Reg. T ) C R E D I T BY B R O K E R S AND D E A L E R S L im ita tion s on Exempt Credit to Specialists P u rs u a n t to th e a u th o r ity c o n t a in e d in the S e c u r it ie s E x ch a n g e A c t o f 1934 (15 U .S .C . 7 8 g ), th e B o a r d o f G o v e r n o r s p r o p o s e s to a m en d P a r t 220 in the fo llo w in g r e s p e c t s : S e c tio n 2 2 0 .4 w o u ld b e a m e n d e d by r e v is in g p a r a g r a p h (g) to r e a d a s f o llo w s : § 2 2 0 .4 S p e c ia l A c c o u n t s * * * * * (g) S p e c i a l i s t 's a c c o u n t . (1) In a s p e c ia l a c c o u n t d e s ig n a t e d a s a s p e c i a l i s t 's a c c o u n t, a c r e d i t o r m a y e f f e c t and fin a n c e , f o r any m e m b e r o f a n a tion a l s e c u r i t i e s e x c h a n g e w ho is r e g i s t e r e d and a c t s a s a s p e c i a l i s t in s e c u r i t i e s on the e x c h a n g e , su ch m e m b e r 's t r a n s a c t io n s a s a s p e c i a l i s t in su ch s e c u r i t i e s , o r e f f e c t and fin a n c e , f o r any jo in t v e n tu r e in w h ich the c r e d i t o r p a r t ic i p a t e s , any t r a n s a c t io n s in any s e c u r i t i e s o f an is s u e w ith r e s p e c t to w h ich a ll p a r t ic ip a n t s , o r a ll p a r t ic ip a n t s o t h e r than the c r e d i t o r , a r e r e g i s t e r e d and a c t on a n a tion a l s e c u r i t i e s e x c h a n g e a s s p e c i a l i s t s . (2) Such s p e c i a l i s t 's a c c o u n t s h a ll b e s u b je c t to the s a m e c o n d it io n s to w h ich it w o u ld b e s u b je c t i f it w e r e a g e n e r a l a c c o u n t e x c e p t that i f the s p e c i a l i s t 's e x c h a n g e , in a d d itio n to the o th e r r e q u ir e m e n ts a p p lic a b le to s p e c i a l i s t s , i s d e s ig n a te d by the B o a r d o f G o v e r n o r s o f the F e d e r a l R e s e r v e S y ste m a s r e q u ir in g r e p o r t s s u it a b le f o r su p p ly in g c u r r e n t in fo r m a t io n r e g a r d in g s p e c i a l i s t s ' u s e o f c r e d i t p u rs u a n t to th is p a r a g r a p h (g ), the r e q u i r e m e n ts o f § 2 2 0 .6 (b ) r e g a r d in g jo in t v e n t u r e s s h a ll not a p p ly to su ch a c c o u n ts and the m a x im u m loan v a lu e o f a r e g i s t e r e d s e c u r it y in su ch a c c o u n t ( e x c e p t a s e c u r it y that h as b een id e n tifie d a s a s e c u r it y h eld f o r in v e s tm e n t p u rs u a n t to a r u le o f the C o m m is s io n e r of In tern a l R ev en u e (R e g s , s e c t io n 1 -1 2 3 6 -1 (d)) s h a ll b e a s d e t e r m in e d b y the c r e d i t o r in g o o d fa ith : P r o v id e d , T hat in the c a s e o f c r e d i t e x te n d e d on any b lo c k o f s t o c k o r p o r t io n t h e r e o f w ith a c u r r e n t m a r k e t v a lu e o f $ 2 0 0 ,0 0 0 o r m o r e , a c q u ir e d f r o m a s in g le s o u r c e at a p p r o x im a te ly the s a m e tim e , w h e th e r in a s in g le t r a n s a c t io n o r in s e v e r a l t r a n s a c t io n s , the r e q u ir e m e n t s o f s u b p a r a g ra p h (3) o f th is p a r a g r a p h (g) s h a ll a ls o a p p ly . (3)(i) In the case of credit extended on any b lock o f stock or portion thereof described in subparagraph (2) of this paragraph (g), the cre d ito r shall identify the cred it extended pursuant to this paragraph (g) and all the collateral used to support such cred it, (ii) No credit shall be extended pursuant to this paragraph (g) in resp ect of any such block of stock o r portion thereof which the specialist has held continuously fo r m ore than 15 business days, and any cred it extended pursuant to this paragraph (g) shall be extinguished b efore the expiration of such 15 day p eriod, (iii) In exceptional ca ses such 15 day period may on application of the specialist and the cred itor be extended fo r one o r m ore p eriods lim ited to 5 business days each com m ensu rate with the circu m stan ces by any regularly co n stituted com m ittee o f a national secu rities exchange which has ju risdiction over the business conduct o f its m em bers, of which the sp ecia list is a m em ber: P rovided , That such com m ittee is satisfied that the sp ecia list and the cred itor are acting in good faith in making the application and that the circu m stan ces in fact warrant such treatment, (iv) For the purposes of this subparagraph (3), a block of stock o r portion th ereof shall be treated as not having been held continuously only to the extent that there has been a net sale (or in the case of short p ositions, net purchase) of such secu rities (whether o r not represented by the sam e certificate) during such 15 day period and/or such extension. * * * * * The p rop osed change in § 220.4(g) would re strict the ability of sp ecia lists to obtain exempted credit from other b ro k e r/d e a le r s without regard to the lim itations of Part 220 (Regulation T) in connection with substantial blocks of stock positioned in the cou rse of their sp ecia list activity. Such credit would be available fo r a lim ited period of tim e only, and would be in conform ity with restriction s sim ila r to those that would be im posed under Part 221 (Regula tion U) on cred it by banks to finance block position ing by sp ecia lists, third-m arket m akers, OTC m a r ket m akers, and b lock -p osition ers. Such period could be extended in exceptional circu m stan ces fo r one o r m ore additional lim ited p eriod s, by a c o m mittee of the exchange of which the specia list was a m em ber. The change would also cla rify that s e c u r i ties held fo r investment are not eligible fo r exempt credit under § 220.4(g). The p rovision s fo r bank cred it to finance specia lists and OTC market m akers are contained in Part 221 (Regulation U) in § 221.3 (o) and § 221.3 (w) respectively and proposed amend ments to these sections are being published sim u l taneously with this proposal. This notice is published pursuant to section 553(b) of Title 5, United States Code, and § 262.2(a) of the Rules of P rocedu re of the Board of Governors of the Federal R eserve System (12 CFR 262.2(a)). To aid in the consideration of these matters by the Board, interested person s are invited to submit relevant data, view s, o r argum ents. Any such m aterial should be submitted in writing to the Secretary, the Board of G overnors o f the Federal R eserve System, Washington, D.C. 20551, to be received not later than March 17, 1971. Such m ate rial will be made available by inspection and copying upon request, except as provided in § 261.6(a) of the B oard's Rules Regarding Availability of Information. (Reg. U ) C R E D I T BY BANKS FOR T H E P U R P O S E OF P U R C H A S IN G OR C A R R Y I N G R E G I S T E R E D STOCKS L im ita tion s on Exempt Cred it to S p ecialists and O T C market makers; Proposal for Exempt Credit to Third Market Makers and Blo ck-Po sitio ners Pursuant to the authority contained in the Securities Exchange Act of 1934 (15 U.S.C. 78g), the Board of G overnors p rop oses to amend Part 221 in the follow ing respects: Section 221.3 would be amended by revising paragraph (o) and subparagraph (1) of paragraph (w) and by adding paragraph (y) and paragraph (z), as set forth below: § 221.3 M iscellaneous P rovision s * * * * * (o) S pecialist. In the case of cred it extended to a m em ber of a national secu ritie s exchange who is registered and acts as a sp ecia list in secu rities on the exchange for the purpose of financing such m em b er's transactions as a sp ecia list in such secu rities, the maximum loan value o f any stock (except stock that has been identified as a secu rity held fo r investment pursuant to a rule of the C om m ission er of Internal Revenue (Regs, section 1-1236-1 (d)) and except a block o f stock or portion th ereof with a current market value of $200,000 o r m ore, acquired from a single sou rce at approxim ate ly the sam e tim e, whether in a single transaction o r in several transactions) shall be as determ ined by the bank in good faith: P rovided, That the sp e c ia lis t's exchange, in addition to other re q u ire ments applicable to sp ecia lists, is designated by the Board o f G overnors of the Federal R eserve System as requiring reports suitable fo r supplying current inform ation regarding s p e cia lis ts' use of cred it p u r suant to this section. * * * * * (w) OTC market m aker exem ption. (1) In the case o f cred it extended to an OTC market maker, as defined in subparagraph (2) of this paragraph (w), for the purpose of purchasing o r carryin g an OTC margin stock in ord er to conduct the m ark etmaking activity of such a m arket m aker, the m axi mum loan value of any OTC m argin stock (except stock that has been identified as a secu rity held fo r investment pursuant to a rule o f the C om m issioner of Internal Revenue (Regs, section 1-1236-1 (d)) and except a block of stock o r portion th ereof with a current m arket value of $200,000 o r m ore, a c quired from a single sou rce at approxim ately the same tim e, whether in a single transaction o r in several transactions) shall be determ ined by the bank in good faith: P rovided , That in respect of each such stock the OTC m arket m aker shall have filed with the Securities and Exchange Com m ission a notice of his intent to begin o r continue such m arket-m aking activity (Securities and Exchange C om m ission Form X -17A -12(a)) and all other r e ports required to be filed by m arket m akers in OTC margin stocks pursuant to a rule of the Com m ission (Rule 17a-12 (17 CFR 240.17a-12)) and shall not have ceased to engage in such m arket-m aking activity: And provided further, That the bank shall obtain and retain in its re co rd s fo r at least three years after such cred it is extinguished a statement in conform ity with the requirem ents o f Federal R e s e rv e F orm U-2, executed by the OTC market m aker who is the recipient of such cred it and executed and accepted in good faith* by a duly authorized o ffic e r of the bank p r io r to such e x tension. In determ ining whether o r not an extension of cred it is fo r the purpose of conducting such m arket-m aking activity, a bank may rely on such a statement if executed and accepted in accordance with the requirem ents o f this paragraph (w) and section 221.3(a). transactions fo r his own account in reasonable amounts, and at his quoted p rice s , with other brok ers and dealers, (iii) he does no m ore than 25 p er cent o f his business in the stock with other market m akers and national secu rities exchanges and (iv) he has a reasonable average rate o f inventory turnover on the stock. (3) If all o r a portion o f the cred it extended pursuant to this paragraph (y) ce a se s to be fo r the purpose sp ecified in subparagraph (1) o r the dealer * * * * * to whom the cred it is extended ce a se s to be a third-m arket m aker as defined in subparagraph (2), (y) T h ird-m arket m aker exem ption. (1) in the ca se o f cred it extended to a third-m arket m aker, the cred it o r such portion th ereof shall thereupon as defined in subparagraph (2) o f this paragraph (y), be treated as "a cred it subject to § 221.1". fo r the purpose of purchasing o r carryin g a stock (z) B lock positioner exemption. (1) In the case o f that is reg istered on a national secu rities exchange cred it extended to a block p ositioner, as defined in (other than a convertible secu rity d escribed in subparagraph (2) o f this paragraph (z), fo r the p u r section 221.3 (t) (1) of this part) in o rd er to conduct p ose of financing the activity o f block positioning, the m arket-m aking activity of such a market maker, the maximum loan value of any stock obtained in the ordinary co u rse of the activity o f b lo ck -p o sitio n the maximum loan value o f any such stock (except ing as d escribed in subparagraph (2) o f this p ara (i) a convertible security d escrib ed in section graph (z) (except (i) a convertible secu rity d escribed 221.3 (t)(l) of this part, (ii) stock that has been in section 221.3 (t)(1) of this part and (ii) stock that identified as a secu rity held fo r investment pursuant has been identified as a security held fo r investment to a rule of the C om m issioner of Internal pursuant to a rule of the C om m ission er o f Internal Revenue (Regs, section 1-1236-1 (d)) and (iii) a block Revenue (Regs, section 1-1236-1 (d)) shall be d e o f stock o r portion thereof with a current m arket term ined by the bank in good faith: P rovided. That value o f $200,000 o r m ore, acquired from a single in resp ect of such activity he shall have filed with so u rce at approxim ately the same tim e, whether in the Securities and Exchange C om m ission a notice of a single transaction o r in several transactions), undertaking such activity on a form p rescrib ed by shall be determ ined by the bank in good faith: the C om m ission, and all other rep orts required to P rovided , That in resp ect o f each such stock he be filed by b lo ck -p o sitio n e rs: And provided further, shall, at least ten full business days p rio r to such That the bank shall obtain and retain in its re co rd s extension o f cred it, have filed with the Securities fo r at least three yea rs after such cred it is e x and Exchange C om m ission a notice o f his intent to tinguished a statement in conform ity with the req u ire begin o r continue such m arket-m aking activity, and ments o f Federal R eserve Form U-5 and section all other rep orts required to be filed by third 221.3(a), executed by the block p osition er who is the market m akers pursuant to a rule o f the Securities recipient of such cred it and executed and accepted and Exchange C om m ission and, except when such in good faith* by a duly authorized o ffic e r o f the activity is unlawful, shall not have ceased to engage bank p r io r to such extension. In determ ining whether in such m arket-m aking activity: And provided fu r o r not an extension of credit is fo r the purpose o f th er, That the bank shall obtain and retain in its conducting such block positioning activity, a bank re c o rd s fo r at least three yea rs after such credit may rely on such a statement if executed and a c is extinguished a statement in conform ity with the cepted in accord an ce with the requirem ents of this requirem ents o f Federal R eserve Form U-3, e x paragraph (z) and section 221.3(a). In determ ining ecuted by the th ird -m a rk er m aker who is the whether o r not an extension o f time has been recipient of such cred it and executed and accepted granted pursuant to subparagraph (3) o f this p a ra in good faith* by a duly authorized o ffic e r o f the graph (z) and whether o r not such extension o f tim e bank p r io r to such extension. In determining whether is com m ensurate with the circu m stan ces the bank o r not an extension of cred it is fo r the purpose of may rely on a statement executed by an o ffic e r of conducting such m arket-m aking activity, a bank may the exchange o r association on behalf of the c o m rely on such a statement, if executed and accepted mittee in con form ity with the requirem ents of Federal in a ccord an ce with the requirem ents of this paragraph R eserve Form U-6 and section 221.3(a). (y) and section 221.3(a). (2) A third-m arket m aker with resp ect to a (2) A block p osition er is a dealer who (i) is stock that is registered on a national secu rities registered with the Securities and Exchange C om exchange is a dealer who has and maintains net m ission under section 15 of the Securities Exchange capital, as defined in a rule of the S ecurities and Act o f 1934 (15 U.S.C. 78o) and has a minimum net Exchange C om m ission (Rule 1 5 c 3 -l (17 C FR 240.15c capital, as defined in a rule o f the Securities and 3 -1 )), o f $250,000 fo r each such stock in resp ect Exchange C om m ission (Rule 1 5 c 3 -l (17 CFR 240.15 c 3 - l ) ) or in the capital rules o f an exchange of o f which he has filed and not withdrawn a notice with the S ecurities and Exchange C om m ission (but which he is a m em ber if the m em bers thereof are in no case does this subparagraph (2) require net exempt therefrom by Rule 1 5 c 3 -l (b) (2) of the C o m capital of m o r e than $1,000,000), who is in com pliance m ission (17CFR 2 40 .1 5 c3 -l(b )(2 ), o f $250,000, o r with such rule of the C om m ission and who, except who is a registered specialist on a national s e c urities exchange, (ii) engages in the activity of p u r when such activity is unlawful, m eets all the follow chasing long o r selling short as principal, from ing conditions with respect to such stock: (i) he tim e to tim e, from or to a cu stom er (other than a furnishes bona fide, com petitive bid and offe r quota partner o r a joint venture o r other entity in which tions at all tim es to other b ro k e r/d e a le r s on r e a partner of the dealer, o r the d ealer itself, p a r quest, (ii) he is ready, willing, and able to effect *A.s d escribed in section 221.3(a). ticipates, o r a person "a ssocia ted with" such dealer as defined in section 3(a) (18) o f the Securities Ex change Act of 1934) a block of stock (other than a convertible security as d escribed in section 221.3 (t) (1) of this part) with a current market value of $200,000 o r m ore, in a single transaction to fa c ili tate a sale o r purchase by such cu stom er, (iii) c e r tifie s to the lending bank that he has determined in the e x e r cise o f reasonable diligence that the block could not be sold to o r purchased from others on equivalent o r better term s, and (iv) sells the shares com prisin g such block as rapidly as possible c o m mensurate with the circu m stan ces. (3) No cred it shall be extended o r maintained pursuant to this paragraph (z) in resp ect of any such block o f stock o r portion th ereof which the b lo c k p ositioner has held continously fo r m ore than 15 business days, and any cred it extended pursuant to this paragraph (z) shall be extinguished o r brought into conform ity with the initial m argin requirem ents o f sections 221.1 and 221.4 b efore the expiration of such 15 day p eriod. F or the purposes o f this subparagraph, a block o r portion th ereof shall be treat ed as not having been held continuously only to the extent that there has been a net sale (or in the case of short p ositions, net purchase) o f such secu rities (whether o r not represented by the sam e certificate) during such 15 day period. (4) In exceptional ca ses the 15 day period s p e c ified in subparagraph (3) o f this paragraph (z) may on the application of the b lock -p osition er, be e x tended fo r one o r m ore p eriods lim ited to 5 business days each com m ensurate with the circu m stan ces by any regularly constituted com m ittee o f a national secu rities exchange having ju risdiction over the business conduct of its m em bers, o f which the b lo ck position er is a m em ber o r through which his tran s actions are effected, o r by a com m ittee of a national secu rities association : P rovided . That such c o m mittee is satisfied that the b lock -p osition er is acting in good faith in making the application and that the circu m stan ces in fact warrant such treatment. * * * * * The p rop osed change in section 221.3(o) would re strict the ability of sp ecia lists to obtain cred it from banks without regard to the lim itations of Part 221 (Regulation U) in connection with substantial blocks of stock positioned in the cou rse of their sp ecia list activity. Such cred it would be available only in conform ity with the requirem ents of proposed section 221.3(z), and not otherw ise. This restriction is sim ila r to that which would be im posed under Part 220 (Regulation T) on cred it by b ro k e r/d e a le rs to finance block-position ing by sp ecia lists. The change would also cla rify that secu rities held by specia lists fo r investment are not eligible fo r exempt credit under section 221.3 (o). The proposed change in section 221.3 (w) would re strict the ability of OTC m arket m akers to obtain exempted cred it from banks without regard to the lim itations of Part 221 (Regulation U) in connection with substantial blocks of stock positioned in the cou rse o f their m arket-m aking activity. Such cred it would be available only in conform ity with the r e quirem ents o f proposed section 221.3(z), and not otherw ise. Section 221.3 (x), proposed fo r comment by the Board of G overnors on May 5, 1969 (34 Federal R egister 7823, May 16, 1969), would be revised as section 221.3(y), and would re s trict the ability of third-m arket m akers to obtain cred it from banks without regard to the lim itations o f Part 221 (Regu lation U) in connection with substantial b lock s o f stock positioned in the cou rse o f their m a rk et-m ak ing activity. Such cred it would be available only in conform ity with the requirem ents of proposed section 221.3 (z), and not otherw ise. The revision would also provide that if the cred it ceased to be fo r the purpose o f making such a market, o r the cu stom er cea sed to be a third-m arket m aker, the rem aining cred it would becom e restricted in a ccord an ce with the p r o visions o f section s 221.1 and 221.4 of this part. A sim ila r p rovision applies to OTC market m akers under section 221.3 (w). The proposed paragraph (z) of section 221.3 would perm it certain b ro k e r/d e a le r s (including qual ifying sp ecia lists, third-m arket m akers, and OTC market m akers) to obtain cred it from banks without regard to the restriction s of Part 221 (Regulation U) in connection with their activities as b lo c k -p o s itioners. However, the cred it would have to be brought into conform ity with the initial m argin requirem ents im posed by Part 221 if (1) the cred it ceased to be fo r the purpose of carryin g on such an activity, o r (2) the dealer ceased to be a b lo ck -p o sitio n e r. In any event, cred it extended pursuant to paragraph (z) would have to be paid back o r brought into co n form ity with ordinary margin requirem ents within 15 business days, unless extended in exceptional ca ses, fo r one or m ore additional p eriod s lim ited to 5 business days each by appropriate p roced u res. For cred it to be in connection with b lo c k -p o s i tioning, the b ro k e r/d e a le r must ce rtify that the cred it is used to buy a substantial amount o f secu rities in ord e r to facilitate a secu rities transaction too large to be handled through norm al channels. The cred it would enable the b ro k e r/d e a le r to acquire fo r his own account that part of the transaction that the market could not otherw ise absorb; he must th e re after clo s e his position as quickly as circu m stan ces perm it. Any cred it extended in connection with the transaction thereafter b ecom es subject to the ord in ary initial margin requirem ents im posed by Part 221. This notice is published pursuant to section 553(b) o f Title 5, United States Code, and section 262.2(a) of the Rules of P roced u re of the B oard o f G overnors of the Federal R eserve System (12 C FR 262.2(a)). To aid in the consideration o f these m atters by the Board, interested person s are invited to submit relevant data, view s, o r arguments. Any such m ate rial should be submitted in writing to the Secretary, the Board o f G overnors of the Federal R eserve System, Washington, D.C. 20551, to be receiv ed not later than M arch 17, 1971. Such m aterial will be made available by inspection and copying upon r e quest, except as provided in § 261.6(a) of the B oa rd 's Rules Regarding Availability of Information.
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