Full text of Federal Reserve Bank of New York Circulars : 6973. Amendments to Regulations G, T, and U

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FEDERAL RESERVE BANK
OF NEW YORK

r Circular No. 6 9 7 3 1
L
July 18, 1972
J

AMENDMENTS TO REGULATIONS G, T, AND U
Same-Day Substitutions; Convertible “ H edge” Transactions

To A ll Persons E xtending Securities Credit in the Second Federal Reserve D istrict;

Following is the text of a statem ent issued Ju ly 13 by the Board of Governors of
the Federal Reserve System:
T h e B o a rd o f G o v e rn o rs of th e F e d e r a l R e serv e S y ste m a n n o u n c e d to d a y a p p r o v a l o f a
te c h n ic a l a m e n d m e n t to its m a rg in re g u la tio n s d e s ig n e d to im p ro v e th e q u a lity of sto ck m a rk e t
c re d it. T h e ch a n g e, w h ich w ill becom e effective S e p te m b e r 18, w ill s tr e n g th e n th e e q u ity p o sitio n
o f lo w -m a rg in a c c o u n ts w h e n o ffse ttin g sa le s a n d p u rc h a s e s of sto ck c o lla te ra l a re m a d e o n th e
sam e d ay .
T he a m e n d m e n t is th e sam e as th e m o d ified p ro p o s a l p u b lis h e d b y th e B o a rd fo r a d d itio n a l
p u b lic com m en t on J u n e 16. T h e basic a m e n d m e n t w as o rig in a lly p ro p o se d f o r p u b lic co m m en t
on A p r il 28. T h e m o d ific atio n s a n n o u n c e d on J u n e 16 affect th e m a n n e r of c a lc u la tin g th e s ta tu s
of m a rg in ac co u n ts.
U n d e r th e a m e n d m e n t, use of th e “ sa m e -d a y s u b s t itu tio n ” r u le w ill en d in a c c o u n ts w h ere
th e d eb t — a d ju s te d as d efined in th e re g u la tio n — is m o re th a n 60 p e r c e n t of th e m a rk e t v a lu e
of th e stock c o lla te ra l in th e acco u n t.
U n d e r th e “ sa m e -d a y s u b s t itu tio n ” ru le , c u sto m e rs a re p e r m itte d to s u b s titu te one s e c u r ity
f o r a n o th e r in th e ir a c c o u n ts th r o u g h o ffse ttin g p u rc h a s e s a n d sales m a d e on th e sam e d a y ev e n
if th e a c c o u n t is below th e in itia l m a rg in re q u ire m e n t. P re s e n tly , no m a rg in c u s to m e r is r e q u ir e d
to p u t u p a d d itio n a l e q u ity u n le ss he b u y s m o re se c u ritie s th a n h e sells on t h a t d a y . T h is
p ra c tic e m akes it possible fo r cu sto m e rs w ith u n d e r m a rg in e d a c c o u n ts to c o n tin u e tr a d i n g fo r
e x te n d e d p e rio d s w ith o u t p u tti n g u p a d d itio n a l e q u ity .
T he B o a r d ’s a c tio n a m e n d s th e re g u la tio n s g o v e rn in g e x ten sio n s of c r e d it b y b ro k e rs a n d
d e a le rs (R e g u la tio n T ) a n d lo an s by b a n k s a n d o th e r le n d e rs (R e g u la tio n s U a n d G re s p e c tiv e ly )
f o r th e p u rp o s e of p u rc h a s in g o r c a r r y in g stocks re g is te r e d o n a n a tio n a l e x c h an g e o r n a m e d in
th e B o a r d ’s o v e r-th e -c o u n te r m a rg in list.
In a second ac tio n , th e B o a rd a d o p te d , also effective S e p te m b e r 18, a n o th e r te c h n ic a l a m e n d ­
m e n t to R e g u la tio n T to p e r m it sh o rt sa le s of sto ck in to w h ic h b o n d s a r e c o n v e rtib le on th e sam e
te rm s as o r d in a r y s h o rt sales of stock.

Enclosed is a copy of the am endm ents; additional copies will be furnished upon
request.




A lfred

H a y es,

President.

BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
A M END M EN TS TO REGULATIONS G, T, AND U
E ffe c tiv e S e p te m b e r 1 8 ,1 9 7 2
A M E N D M E N T S T O R E G U L A T IO N G —
S E C U R IT IE S C R E D I T BY P E R S O N S
O T H E R T H A N B A N K S, B R O K E R S , O R
DEALERS
1.
S ectio n 2 0 7 .1 ( j ) ( 2 ) is a m e n d e d to re a d
as follow s:
S e c t i o n 207.1 — G e n e r a l R u l e

*

#

*

(j) W ith d ra w a ls a n d su b s titu tio n s o f co l­
la te r a l.* 1
*0

2. S ectio n 207.2 is a m e n d e d b y a d d in g
p a r a g ra p h ( k ) th e re to , as follow s:
S e c t i o n 207.2 — D e f i n i t i o n s

S m ysubstitutionof co tera
a e-cla
lla l.

(2 )
Ex­
c e p t as p r o h ib ite d b y § 2 0 7 .4 (a ) ( 2 ) , in th e
ca se of a c r e d it in w h ic h th e e q u ity ra tio is
e q u a l to o r exceeds th e m in im u m e q u ity ra tio
as p re s c rib e d in § 207.5 ( th e s u p p le m e n t to
th e re g u la tio n ) a le n d e r m a y p e r m it a su b s ti­
tu tio n of m a rg in se c u ritie s effec ted b y a p u r ­
ch a se a n d sale o n o rd e rs e x e c u te d w ith in th e
sa m e d a y :
T h a t ( i ) if th e p ro c e e d s
of th e sale ex c e e d th e to ta l co st of th e p u r ­
ch ase, th e c r e d it is r e d u c e d b y a t le a st a n
a m o u n t e q u a l to th e r e te n tio n r e q u ir e m e n t in
re s p e c t to th e sale less th e re te n tio n r e q u ir e ­
m e n t in re s p e c t to th e p u rc h a s e , o r ( ii) if th e
to ta l co st of th e p u rc h a s e ex ceed s th e p r o ­
ce ed s of th e sale, th e c re d it m a y b e in c re a s e d
b y a n a m o u n t n o g r e a te r th a n th e m ax im u m
lo a n v a lu e of th e se c u ritie s p u r c h a s e d less th e




m a x im u m lo a n v a lu e of th e se c u ritie s sold. If
th e m a x im u m lo a n v a lu e o f th e c o lla te ra l se­
c u rin g th e c r e d it h as b e c o m e less th a n th e
a m o u n t of th e c re d it, th e a m o u n t o f th e c re d it
m a y n o n e th e le ss b e in c re a s e d if th e re is p ro ­
v id e d a d d itio n a l c o lla te ra l h a v in g m ax im u m
lo a n v a lu e a t le a st e q u a l to th e a m o u n t of in ­
cre ase , o r th e c r e d it is e x te n d e d p u r s u a n t to
§ 2 0 7 .4 (a ).

P
rovided,

*

#

*

(k ) T h e te rm “e q u ity r a tio ” m e a n s th e
fra c tio n s ta te d as a p e rc e n ta g e in w h ic h th e
d e n o m in a to r is th e c u r r e n t m a rk e t v a lu e of
th e c o lla te ra l h a v in g lo a n v a lu e in re s p e c t of
th e c r e d it a n d th e n u m e ra to r is su c h c u rre n t
m a rk e t v a lu e m in u s th e a m o u n t of th e c re d it
c u rre n tly o w in g .
3. S ectio n 207.5 ( th e S u p p le m e n t to R e g u ­
la tio n G ) is a m e n d e d b y a d d in g p a ra g ra p h
( f ) th e re to , as fo llo w s:
S e c t i o n 207.5 — S u p p l e m e n t

*

*

*

( f)
M in im u m e q u ity ra tio . T h e m in im u m
e q u ity ra tio of a c re d it s u b je c t to § 207.1 is 40
p e rc e n t.

PR IN T E D IN N E W YORK

A M E N D M E N T S T O R E G U L A T IO N T —
C R E D I T BY B R O K E R S A N D
DEALERS
1.
S ectio n s 2 2 0 .3 ( a ) , ( b ) ( 1 ) , ( d ) ( 3 ) , a n d
( g ) a re a m e n d e d to re a d as fo llow s:
S e c t i o n 220.3 — G e n e r a l A c c o u n t

( a ) Contents of general account. A ll fin an ­
c ial re la tio n s b e tw e e n a c r e d ito r a n d a c u s­
to m e r, w h e th e r re c o rd e d in o n e re c o rd o r in
m o re th a n o n e re c o rd , sh a ll b e in c lu d e d in
a n d b e d e e m e d to b e p a r t of th e c u s to m e r’s
g e n e ra l a c c o u n t w ith th e c re d ito r, e x c e p t th a t
th e re la tio n s w h ic h § 220.4 p e rm its to b e in ­
c lu d e d in a n y sp e c ia l a c c o u n t p ro v id e d fo r b y
th a t se c tio n m a y b e in c lu d e d in th e a p p r o ­
p r ia te sp e c ia l a c c o u n t, a n d all tra n sa c tio n s in
c o m m o d itie s, a n d , e x c e p t to th e e x te n t p r o ­
v id e d in p a r a g r a p h ( b ) ( 2 ) of th is sectio n , all
tra n sa c tio n s in n o n -e q u ity se c u ritie s, e x e m p te d
se c u ritie s, a n d in o th e r se c u ritie s h a v in g no
lo a n v a lu e in a g e n e ra l a c c o u n t u n d e r th e p r o ­
v isio ns o f p a r a g r a p h ( c ) o f th is se ctio n a n d
§ 220.8 ( th e S u p p le m e n t to R e g u la tio n T )
(e x c e p t u n is s u e d se c u ritie s, s h o r t sales a n d
se c u ritie s p o sitio n s to o ffset sh o rt sales o th e r
th a n th o se p e r m itte d in § 2 2 0 .4 (j) ( 5 ) , p u r ­
ch ases to c o v e r s h o rt sales a n d c o n tra c ts in ­
v o lv in g a n e n d o rs e m e n t o r g u a r a n te e o f an y
p u t, call, o r o th e r o p tio n ), sh a ll b e in c lu d e d in
th e a p p r o p r ia te sp e c ia l a c c o u n t p r o v id e d for
b y § 220.4. D u rin g a n y p e rio d w h e n su c h
§ 220.8 specifies th a t m a rg in e q u ity se c u ritie s
sh a ll h a v e no lo a n v a lu e in a g e n e ra l a c c o u n t
o r sp e c ia l c o n v e rtib le d e b t s e c u rity a c c o u n t
( so m e tim es re f e r re d to h e re in as “sp e c ia l
c o n v e rtib le s e c u rity a c c o u n t” ) s u b je c t to
§ 2 2 0 .4 (j) , a n y tra n s a c tio n c o n sistin g of a p u r ­
c h a se o f a s e c u rity o th e r th a n a p u rc h a s e of
a s e c u rity to re d u c e or close o u t a s h o rt p o si­
tio n sh a ll b e e ffe c te d in th e sp e c ia l c a sh a c ­
c o u n t p r o v id e d fo r b y § 2 2 0 .4 (c ) o r in som e
o th e r a p p r o p r ia te sp e c ia l a c c o u n t p r o v id e d fo r
b y § 220.4.

a c c o u n t a n y tra n s a c tio n w h ic h , in c o m b in a tio n
w ith th e o th e r tra n s a c tio n s effe c te d in su c h
a c c o u n t o n th e sa m e d ay , c re a te s an excess of
th e a d ju s te d d e b it b a la n c e o f su c h a c c o u n t
o v e r th e m a x im u m lo a n v a lu e o f th e se cu ritie s
in su c h a c c o u n t, o r in c re ase s a n y su c h excess,
u n le ss in c o n n e c tio n th e re w ith th e c re d ito r
o b ta in s, as p ro m p tly as p o ssib le a n d in an y
e v e n t b e fo re th e e x p ira tio n of 5 fu ll b u sin e ss
d ay s fo llo w in g th e d a te of su c h tra n sa c tio n ,
th e d e p o s it in to su c h a c c o u n t of cash o r s e c u ­
ritie s in su c h a m o u n t th a t th e c a sh d e p o s ite d
p lu s th e lo a n v a lu e o f th e se c u ritie s d e p o s ite d
eq u a ls o r ex c ee d s th e excess so c re a te d o r th e
in c re a se so ca u se d .

(i i )
If th e a d ju s te d d e b it b a la n c e in a g e n ­
e ra l a c c o u n t o r sp e c ia l c o n v e rtib le d e b t s e c u ­
rity ac c o u n t, c o m p u te d u sin g th e m a rg in r e ­
q u ir e m e n t fo r s h o rt sales sp e cifie d
in
§ 2 2 0 .8 (g ) ( 2 ) o f th e S u p p le m e n t to R e g u la ­
tio n T , ex c ee d s th e m a x im u m lo an v a lu e of
th e s e c u ritie s in su c h a c c o u n t sp e cifie d in
§ 2 2 0 .8 (g ) ( 1 ) , th e a c c o u n t is s u b je c t to
§ 2 2 0 .8 (g ) (so m e tim e s re f e r re d to h e re in as
“a c c o u n t s u b je c t to s e c tio n 8 ( g ) ” ). If a n a c ­
c o u n t is s u b je c t to § 2 2 0 .8 (g ) as o f th e close
of b u sin e ss on th e p re c e d in g b u sin e ss d ay , it
sh a ll b e su b je c t, in a d d itio n to all o th e r r e ­
q u ire m e n ts a p p ly in g to th e a c c o u n t, to th e
r e q u ir e m e n t t h a t th e c re d ito r sh a ll n o t effect
a n y tra n s a c tio n in th e a c c o u n t w h ic h cre a te s
a n excess o f th e a d ju s te d d e b it b a la n c e of su ch
a c c o u n t, c o m p u te d u sin g th e m a rg in r e q u ir e ­
m e n ts fo r s h o rt sales sp ecified in § 2 2 0 .8 (d ) ,
o v e r th e m a x im u m lo a n v a lu e of th e se c u ritie s
in su c h a c c o u n t sp e cifie d in § 2 2 0 .8 (a ) a n d
( c ) , o r in c re a se s a n y su c h excess, u n le ss in
c o n n e c tio n th e re w ith th e c re d ito r o b ta in s, as
p ro m p tly as p o ssib le a n d in a n y e v e n t b e fo re
th e e x p ira tio n of 5 fu ll b u sin e ss d ay s fo llo w ­
in g th e d a te o f su c h tra n sa c tio n , th e d e p o s it
in to su c h a c c o u n t of c a sh o r se c u ritie s in su c h
a m o u n t th a t th e c a sh d e p o s ite d p lu s th e loan
v a lu e of th e se c u ritie s d e p o s ite d e q u a ls o r ex­
ceed s th e excess so c r e a te d o r th e in c re a se so
(b )
General rule. ( 1 ) ( i ) A c re d ito r sh a ll ca u se d . T h e r e q u ir e d d e p o s it m a y b e re d u c e d
n o t effe c t fo r o r w ith a n y c u s to m e r in a g e n ­
b y th e a m o u n t o f cash o r se c u ritie s w h ic h
e ra l a c c o u n t, sp e c ia l b o n d a c c o u n t s u b je c t to
o th e rw ise c o u ld b e w ith d r a w n p u r s u a n t to th e
§ 220.4 ( i ), o r sp e c ia l c o n v e rtib le d e b t se c u rity
p ro v isio n s of s u b p a ra g ra p h ( 2 ) o f th is p a r a ­




tio n r e q u ir e m e n t of a n y se c u ritie s so ld fo r
su c h a c c o u n t o n su c h d a y ex c ee d s th e m a x i­
m u m lo a n v a lu e of a n y se c u ritie s p u r c h a s e d
*
*
»
in su c h a c c o u n t o n su c h d ay . S u ch c o m p u ta ­
(d )
A d ju ste d d e b it b a la n c e . F o r th e p u r ­
tio n m a y b e m a d e a t th e clo se o f tr a d in g on
p o se of th is p a rt, th e a d ju s te d d e b it b a la n c e
su c h d a y a n d sh a ll b e m a d e ex c lu siv e o f a n y
of a g e n e ra l a c c o u n t, sp e c ia l b o n d a c c o u n t,
d e p o s it o f cash , d e p o s it o f se c u ritie s, c o v e rin g
o r sp e c ia l c o n v e rtib le d e b t se c u rity a c c o u n t
tra n sa c tio n s o r o th e r liq u id a tio n th a t h a s b e e n
sh a ll b e c a lc u la te d b y ta k in g th e su m of th e
e ffe c te d o n su c h d a y , p u r s u a n t to th e r e q u ir e ­
fo llo w in g ite m s
m e n ts of p a r a g ra p h ( b ) o r ( e ) o f th is se ctio n ,
(3 )
T h e c u r r e n t m a rk e t v a lu e of a n y s e c u ­ in c o n n e c tio n w ith a tra n s a c tio n o n a p re v io u s
d ay .
ritie s ( o th e r th a n u n iss u e d s e c u ritie s) so ld
s h o rt in th e g e n e ra l a c c o u n t p lu s, fo r e a c h se­
( 3 ) In a n y c a se in w h ic h a n excess so
c u rity ( o th e r th a n a n e x e m p te d s e c u r ity ) ,
c re a te d , o r in c re a se so ca u se d , b y tra n s a c tio n s
su c h a m o u n t as th e B o a rd sh a ll p re s c rib e fro m
o n a g iv e n d a y d o es n o t ex c e e d $100, th e
tim e to tim e in § 2 2 0 .8 (d ) ( th e S u p p le m e n t
c r e d ito r n e e d n o t o b ta in th e d e p o s it sp e cifie d
to R e g u la tio n T ) as th e m a rg in r e q u ir e d fo r
th e re fo r in p a r a g ra p h ( b ) ( 1 ) o f th is sectio n .
su c h s h o rt sales, e x c e p t th a t su c h a m o u n t so
( 4 ) A n y tra n s a c tio n w h ic h serv es to m e e t
p re s c rib e d in su c h § 2 2 0 .8 (d ) n e e d n o t b e in ­
th e re q u ire m e n ts of p a r a g ra p h ( e ) of th is se c ­
c lu d e d w h e n th e re a re h e ld in th e g e n e ra l a c ­
tio n o r o th e rw ise serv es to p e r m it a n y off­
c o u n t o r sp e c ia l c o n v e rtib le d e b t se c u rity a c ­
se ttin g tra n s a c tio n in a n a c c o u n t sh all, to th a t
c o u n t th e sa m e se c u ritie s o r se c u ritie s ex­
e x te n t, b e u n a v a ila b le to p e r m it a n y o th e r
c h a n g e a b le o r c o n v e rtib le w ith in 90 c a le n d a r
tra n s a c tio n in su c h ac c o u n t.
d ay s, w ith o u t re stric tio n o th e r th a n th e p a y ­
m e n t o f m o n e y , in to su c h se c u ritie s so ld sh o rt;
( 5 ) F o r th e p u rp o s e s of th is p a r t ( R e g u la ­
#
*
tio n T ), if a se c u rity h as m a x im u m lo a n v a lu e
u n d e r p a r a g ra p h ( c ) ( 1 ) o f th is se c tio n in a
( g ) T ra n s a c tio n s o n g iv e n d ay . ( 1 ) F o r
g e n e ra l a c c o u n t, o r u n d e r § 2 2 0 .4 (j) in a s p e ­
th e p u rp o s e of p a r a g r a p h ( b ) ( 1 ) of th is se c ­
c ial c o n v e rtib le d e b t se c u rity a c c o u n t, a sa le
tio n , e x c e p t in th e c a se o f a n a c c o u n t su b je c t
of th e sa m e s e c u rity ( e v e n th o u g h n o t th e
to se c tio n 8 ( g ) , th e q u e s tio n o f w h e th e r o r n o t
sa m e c e rtific a te ) in su c h a c c o u n t sh a ll b e
an excess of th e a d ju s te d d e b it b alan c e, o f a
d e e m e d to b e a lo n g sale a n d sh a ll n o t b e
g e n e ra l a c c o u n t, sp e c ia l b o n d a c c o u n t, o r s p e ­
d e e m e d to b e o r tr e a te d as a s h o rt sale.
c ial c o n v e rtib le d e b t se c u rity a c c o u n t o v e r th e
g ra p h in c o n n e c tio n w ith a n y o th e r tr a n s a c ­
tio n s in th e a c c o u n t on th e sa m e day.

:***

m a x im u m lo a n v a lu e of th e se c u ritie s in su c h
a c c o u n t is c r e a te d o r in c re a se d on a g iv e n d a y
sh a ll b e d e te r m in e d o n th e basis of all th e
tra n sa c tio n s in th e a c c o u n t on su c h d a y ex­
c lu siv e of a n y d e p o s it of cash, d e p o s it of se c u ­
ritie s, co v e rin g tra n sa c tio n s, o r o th e r liq u id a ­
tio n th a t h as b e e n effe c te d on su c h d ay , p u r ­
s u a n t to th e re q u ire m e n ts o f p a r a g ra p h ( b ) or
( e ) of th is sectio n , in c o n n e c tio n w ith a
tra n s a c tio n on a p re v io u s d ay .
(2 )
In th e ca se of a n a c c o u n t s u b je c t to
se ctio n 8 ( g ) , th e r e q u ir e d d e p o s it, u n d e r
p a r a g ra p h ( b ) ( l ) ( i i ) of th is se ctio n in c o n ­
n e c tio n w ith tra n sa c tio n s on a g iv e n d a y , sh all
b e e q u a l to th e a m o u n t b y w h ic h th e r e te n ­




2.
S ectio n 2 2 0 .4 (j) (4 ) is a m e n d e d a n d su b p a r a g ra p h (5 ) is a d d e d th e re to , as fo llo w s:
S e c t i o n 220.4 — S p e c i a l A c c o u n t s
*
#
ft

( j ) S p e c ia l c o n v e rtib le d e b t s e c u rity a c ­
c o u n t. * *

*

(4 )
I n th e e v e n t a n y c o n v e rtib le d e b t se c u ­
rity h e ld in th is a c c o u n t is to b e c o n v e rte d to
a stock, su c h s e c u rity sh a ll u p o n co n v e rsio n
b e tra n s f e rr e d to th e c u s to m e r’s g e n e ra l a c ­
c o u n t a g a in s t a d e p o s it o f c a sh o r m a rg in
se c u ritie s e lig ib le fo r a n e x te n sio n of c r e d it in
th is a c c o u n t ( c o u n te d a t th e ir m a x im u m lo a n
v a lu e ) e q u a l to a t le a s t th e m a x im u m lo a n

v a lu e of th e s e c u rity so tr a n s f e rr e d w ith o u t
re g a rd to th e r e te n tio n re q u ir e m e n t of
§ 2 2 0 .3 (b ) ( 2 ) .

A M E N D M E N T S T O R E G U L A T IO N U —
C R E D I T BY BA N K S F O R T H E
P U R P O S E O F P U R C H A S IN G O R
C A R R Y IN G M A R G IN S T O C K S
(5)
In a sp e c ia l c o n v e rtib le d e b t se c u rity
1. S ectio n 2 2 1 .1 (c ) is a m e n d e d to re a d as
a c c o u n t th e a m o u n t of m a rg in e q u ity s e c u ri­
fo llo w s :
ties in to w h ic h a m a rg in d e b t s e c u rity h e ld in
S e c t i o n 221.1 — G e n e r a l R u l e
th e a c c o u n t is c o n v e rtib le m a y b e so ld sh o rt
*
<
*
*
w ith o u t r e g a rd to th e m a rg in r e q u ir e d fo r
(c )
S a m e -d a y tra n sa c tio n s. ( 1 ) E x c e p t as
s h o rt sales in § 2 2 0 .8 (d ) ( S u p p le m e n t to
p ro v id e d in § 2 2 1 . 3 ( r ) ( l ) , a b a n k m a y in th e
R e g u la tio n T ) , a n d su c h s h o rt p o sitio n m ay
ca se o f a c r e d it in w h ic h th e e q u ity ra tio is
b e c a rrie d in th e sp e c ia l c o n v e rtib le d e b t se­
e q u a l to or ex ceed s th e m in im u m e q u ity ra tio
c u rity a c c o u n t in c o n fo rm ity w ith th e e x c e p ­
as p re s c rib e d in § 2 2 1 .4 ( th e su p p le m e n t to
tio n p r o v id e d in § 220.3 ( d ) ( 3 ) .
th e re g u la tio n ) p e rm it a s u b s titu tio n of sto ck
w h e th e r m a rg in o r n o n -m a rg in , effec ted b y a
3.
S ectio n 220.8 ( th e S u p p le m e n t to R e g u ­
p u rc h a s e a n d sale o n o rd e rs e x e c u te d w ith in
la tio n T ) is a m e n d e d b y re d e s ig n a tin g p a r a ­
th e sa m e d a y :
T h a t ( i ) if th e p r o ­
g ra p h s ( g ) a n d ( h ) as p a r a g ra p h s ( h ) a n d (i),
ce ed s of th e sale e x c ee d th e to ta l co st o f th e
re sp e c tiv e ly , a n d b y a d d in g a n e w p a r a g r a p h
p u rc h a s e , th e c r e d it is r e d u c e d b y a t le a s t an
( g ) th e re to , as fo llo w s:
a m o u n t e q u a l to th e “r e te n tio n re q u ir e m e n t”
w ith re s p e c t to th e sale less th e “r e te n tio n re ­
S e c t i o n 220.8 — S u p p l e m e n t
q u ir e m e n t” w ith r e s p e c t to th e p u rc h a se , or
#
»
#
(i i ) if th e to ta l co st of th e p u rc h a s e ex ceed s
(g )
A c c o u n t s u b je c t to se c tio n 8 ( g ) . F o r
th e p ro c e e d s o f th e sale, th e c r e d it m a y b e in ­
p u rp o se s of th e c o m p u ta tio n d e s c rib e d in
c re a se d b y an a m o u n t no g re a te r th a n th e
§ 220.3(b)(1)(a),
m a x im u m lo a n v a lu e o f th e sto c k p u rc h a s e d
less th e m a x im u m lo a n v a lu e of th e sto c k sold.
( 1 ) T h e m a x im u m lo a n v a lu e o f a re g is ­
If th e m a x im u m lo a n v a lu e o f th e c o lla te ra l
te re d n o n -e q u ity s e c u rity h e ld in th e a c c o u n t
se c u rin g th e c re d it h as b e c o m e less th a n th e
o n M a rc h 11, 1968, a n d c o n tin u o u sly th e r e ­
a m o u n t of th e c re d it, th e a m o u n t of th e c re d it
a fte r, a n d of a m a rg in e q u ity s e c u rity sh a ll
m a y n o n e th e le ss b e in c re a se d if th e re is p r o ­
b e 60 p e r c e n t o f th e c u r r e n t m a rk e t v a lu e of
v id e d a d d itio n a l c o lla te ra l h a v in g m ax im u m
su c h se c u rity , a n d th e m a x im u m lo a n v a lu e of
lo a n v a lu e a t le a s t e q u a l to th e a m o u n t of th e
a n e x e m p te d se c u rity h e ld in th e a c c o u n t on
in c re ase .
M a rc h 11, 1968, a n d c o n tin u o u sly th e re a f te r
(2 )
F o r th e p u rp o s e o f th is p a ra g ra p h , th e
sh a ll b e th e m a x im u m lo a n v a lu e o f th e se c u ­
te rm “e q u ity r a tio ” m e an s th e fra c tio n ( s ta te d
rity as d e te rm in e d b y th e c r e d ito r in go o d
as a p e r c e n ta g e ) in w h ic h th e d e n o m in a to r is
fa ith .
th e c u r r e n t m a rk e t v a lu e of th e c o lla te ra l h a v ­
in g lo an v a lu e in re s p e c t of th e c re d it a n d th e
( 2 ) T h e a m o u n t to b e in c lu d e d in th e a d ­
n u m e ra to r is su c h c u r r e n t m a rk e t v a lu e m in u s
ju s te d d e b it b a la n c e o f th e a c c o u n t p u r s u a n t
th e a m o u n t o f th e c r e d it c u rre n tly o w in g .
to § 2 2 0 .3 ( d ) ( 3 ) as m a rg in r e q u ir e d fo r sh o rt
2.
S ectio n 221.4 ( th e S u p p le m e n t to R e g u ­
sales of se c u ritie s ( o th e r th a n e x e m p te d se c u ­
la tio n U ) is a m e n d e d b y a d d in g p a r a g ra p h
r itie s ) sh a ll b e 40 p e r c e n t of th e c u rre n t
( f ) th e re to , as fo llo w s:
m a rk e t v a lu e of e a c h se cu rity .

P
rovided,

S e c t i o n 221.4 — S u p p l e m e n t

4.
I n §220.2(e)(2), th e re fe re n c e to §220.8(g)
is c h a n g e d to §220.8(h); a n d in §220.2(e)(3)(ii),
th e re fe re n c e to l 2 2 0 .8 (h ) is c h a n g e d to
S
§ 2 2 0 .8 (i).




o

*

a

(f)
M in im u m e q u ity ra tio . T h e m in im u m
e q u ity ra tio o f a c re d it s u b je c t to § 221.1 is 40
p e rc e n t.