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FED ER A L R ESERVE BANK O F NEW YORK J I” Circular No. 7050 |_ December 5, 1972 CREDIT BY BROKERS AND DEALERS Proposed Amendments to Regulation T To A ll Brokers and Dealers, and Members o f National Securities Exchanges, in the Second Federal Reserve District: Printed on the reverse side of this circular is an excerpt from the Federal Register of December 1, containing the texts of proposed amendments to Regulation T, “Credit by Brokers and Dealers,” of the Board of Governors of the Federal Reserve System. The purposes of the amendments are (a) to shorten the time allowed for payment-against-delivery cash transactions from 35 days to 15 days, and (b) to clarify the computation of the 90-day restriction in special cash accounts. Comments on the proposals should be submitted by December 22 and may be sent to our Regulations and Bank Analysis Department. ALFRED HAYES, President. (Over) FEDERAL RESERVE SYSTEM [1 2 CFR Part 220 ] [Reg. T] CREDIT BY BROKERS AND DEALERS Time A llo w e d fo r Payment A gainst Delivery Cash Transactions T h e B o ard of G overn o rs p ro p o ses to a m e n d P a r t 220 in o rd e r to s h o r te n th e tim e allow ed fo r p a y m e n t a g a in s t d e livery c a sh tra n s a c tio n s fro m 35 days to 15 days. S ectio n 220.4(c) of P a r t 220, C re d it by B ro k ers a n d D ealers, w ould be a m en d e d as s e t f o r th below : § 2 2 0 .4 Sp ecial accounts. * * * * * (c) Sp ecia l cash a cco u n t. * * * (5) I f th e cre d ito r, a c tin g in good f a ith in a c co rd an ce w ith su b p a ra g ra p h ( ) of th is p a ra g ra p h , p u rc h a s e s a se c u rity fo r a cu sto m er, o r sells a se c u rity to a cu sto m er, w ith th e u n d e rs ta n d in g t h a t h e is to deliver th e se c u rity p ro m p tly to th e cu sto m er, a n d th e fu ll c a sh p a y m e n t to be m a d e p ro m p tly by th e c u s to m e r is to be m a d e a g a in s t su c h d elivery, th e c re d ito r m a y a t h is o p tio n t r e a t th e tr a n s a c tio n as one to w h ich th e p e rio d ap p licab le u n d e r s u b p a r a g ra p h ( ) of th is p a r a g r a p h is n o t th e 7 d a y s th e r e in specified b u t 15 d ay s a f te r th e d a te of su c h p u rc h a s e o r sale. * * * * * (7) T h e 7 -d ay p erio d s specified in th is p a ra g r a p h re fe r to 7 full b u sin ess days. T h e 15-day p e rio d a n d th e 90-d a y p erio d specified in th is p a ra g r a p h re fe r to c a le n d a r days, b u t if th e la s t d ay of a n y su ch p erio d is a S a tu rd a y , S u n d a y , o r h o lid ay , su c h p erio d sh a ll be c o n sid ere d to e n d o n th e n e x t fu ll b u sin ess day. F o r th e p u rp o ses of th is p a ra g r a p h , a c re d ito r m ay , a t h is o p tio n , d isre g a rd a n y su m due by th e c u sto m e r n o t e x ceeding $ . * * * * * T h e p u rp o se of th e pro p o sed c h an g es in R e g u la tio n T is to in d ic a te to p a r tic ip a n ts in se c u ritie s tr a n s a c tio n s w h ich a re to be c o n su m m a te d by p a y m e n t a g a in s t delivery t h a t 15 c a le n d a r d ay s in s te a d of th e p re s e n t 35 c a le n d a r d ay s Is sufficient tim e in w h ich to effect s e t tle m e n t, a b s e n t ex c e p tio n a l c irc u m sta n c e s. T h e B o a rd is a ffo rd in g in te re s te d p e r sons a n o p p o rtu n ity to su b m it re le v a n t d a ta , views, o r a rg u m e n ts c o n c e rn in g th e p ro p o sed a m e n d m e n t. A ny su c h m a te ria l sh o u ld be s u b m itte d in w ritin g to th e S e c re ta ry , B o a rd of G o v ern o rs of th e F e d e ra l R eserv e S y stem , W a sh in g to n , D .C. 20551, to be received n o t la te r th a n D ecem b er 22, 1972. S u c h m a te ria l will be m a d e av a ila b le fo r in s p e c tio n a n d cop y in g u p o n req u e st, e x cep t as p ro v id ed in 5 261.6(a) o f th e B o a rd ’s R u les R e g a rd in g A v ailab ility of In fo rm a tio n . T h is n o tic e is p u b lish ed p u r s u a n t to sectio n 553(b> of T itle 5, U.S.C., a n d § 262.2(a) of th e R ules of P ro c e d u re of th e B o a rd o f G o v ern o rs of th e F e d e ra l R eserve S y stem (12 C P R 2 6 2 .2 (a )). By o rd e r of th e B o a rd o f G ov ern o rs, N ovem ber 20, 1972. [seal! [FR D oc.72—20697 F iled ll-3 0 -7 2 ;8 :5 4 am ] 1 2 100 M ic h a e l A. G reen sp a n , A ssista n t S e c re ta ry o f th e B oard. [ 12 CFR Part 220 ] [Reg. T] CREDIT BY BROKERS AND DEALERS N inety-D ay Restriction in Special Cash Account T h e B o a rd of G o v ern o rs p roposes to a m e n d P a r t 220 (R e g u la tio n T ) by m a k in g a m in o r c h a n g e in la n g u a g e w ith in su b sectio n ( ) of S ectio n 220.4(c) to cla rify t h a t th e c o m p u ta tio n of th e 90d ay freeze b egins w ith th e tr a d e d a te o f th e sa le of a se c u rity w ith re sp e c t to w h ich th e c u sto m e r h a s n o t p reviously p a id f o r th e co st of th e p u rc h a s e w ith in th e a llo tte d 7 b u sin ess days, r a t h e r th a n w ith th e tr a d e d a te of su ch p u rc h a se . T h is c h a n g e w ould be acco m p lish ed by s h iftin g th e p re p o sitio n a l p h ra s e “d u r in g th e p re ce d in g 90 d a y s” in th e first se n te n c e o f su b sectio n ( ) fro m w ith in th e body to th e e n d of th e p o rtio n of th e se n te n c e p rece d in g th e proviso. T h e te x t of th e pro p o sed a m e n d m e n t re a d s as follow s: 8 8 § 2 2 0 .4 Special accounts. * * * * * (c) S p ecia l ca sh a cco u n t. * * * ( ) U nless fu n d s sufficient fo r th e p u r pose a re a lre a d y in th e a cco u n t, no se c u rity o th e r th a n a n e x em p ted se c u rity sh a ll be p u rc h a s e d for, o r sold to, a n y c u sto m e r in a sp ecial c a sh a c c o u n t w ith th e c re d ito r if a n y se c u rity o th e r th a n a n ex e m p te d se c u rity h a s been p u rc h a se d by su c h c u sto m e r in su c h a n a c co u n t, a n d 8 th e n , fo r a n y re a s o n w h atev er, w ith o u t h a v in g b een prev io u sly p a id fo r in fu ll by th e cu sto m er, th e se c u rity h a s b een sold in th e a c c o u n t o r delivered o u t to a n y b ro k e r o r d e a le r d u rin g th e p re c e d in g 90 d a y s: P rovided, T h a t a n a p p ro p ria te c o m m itte e of a n a tio n a l secu rities e x c h a n g e o r a n a tio n a l se c u rities asso c iatio n , on a p p lic a tio n of th e c red ito r, m a y a u th o riz e th e c re d ito r to d isre g a rd fo r th e p u rp o ses of th is su b p a ra g ra p h a n y given in s ta n c e o f th e ty p e th e re in d escrib ed if th e c o m m itte e is satisfied t h a t b o th c re d ito r a n d c u sto m er a re a c t in g in good f a ith a n d t h a t c ircu m stan ces w a r r a n t su c h a u th o riz a tio n . F o r th e p u r poses of th is s u b p a ra g ra p h , th e c a n c e l la tio n o f a tra n s a c tio n , o th erw ise th a n to c o rre c t a n e rro r, sh a ll be deem ed to c o n s titu te a sale. T h e c re d ito r m ay d is re g a rd f a r th e pu rp o ses of th is s u b p a r a g ra p h a sale w ith o u t p rio r p a y m e n t p ro vid ed fu ll c a sh p a y m e n t Is received w ith in th e p e rio d d escrib ed by s u b p a r a g ra p h ( ) o f th is p a ra g r a p h a n d th e c u sto m e r h a s n o t w ith d ra w n th e p ro ceeds of sale o n o r b efo re th e d ay on w h ich su ch p a y m e n t (a n d also fin al p a y m e n t of a n y ch eck received in t h a t c o n n e c tio n ) is received. T h e c re d ito r m ay so d is re g a rd a deliv ery of a se cu rity to a n o th e r b ro k e r o r d e a le r p ro v id ed su ch delivery w as fo r d e p o sit in to a special c a sh a c c o u n t w h ich th e la tte r b ro k e r o r d e a le r m a in ta in s fo r th e sam e cu sto m e r a n d in w h ich a c c o u n t th e re a re a lre a d y sufficient fu n d s to p a y fo r th e se cu rity so p u rc h a s e d : a n d fo r th e p u rp o se of d e te rm in in g in t h a t c o n n e c tio n th e s ta tu s o r a c u sto m e r’s a c c o u n t a t a n o th e r b ro k e r o r d eale r, a c re d ito r m ay rely u p o n a w ritte n s ta te m e n t w h ich h e accep ts in good f a ith fro m su ch o th e r b ro k er o r d ealer. T o aid in th e co n sid e ra tio n by th e B o a rd of th is pro p o sed a m e n d m e n t, in te re ste d p erso n s a re in v ite d to su b m it re le v a n t d a ta , views, o r a rg u m e n ts in w ritin g to th e S e c re ta ry , B o a rd of G ov e rn o rs of th e F e d e ra l R eserve S ystem , W ash in g to n , D.C. 20551, to be received n o t la te r th a n D ecem ber 22, 1972. S u c h m a te ria l will be m a d e av a ila b le fo r in sp ectio n a n d copying u p o n req u est, e x c e p t as pro v id ed in § 261.1(a) of th e B o a rd ’s R u les R e g a rd in g A v ailability of In fo rm a tio n . 2 By o rd e r o f th e B o a rd of G overnors, N ovem ber , 1972. 22 M i c h a e l A. G r e e n s p a n , A ssista n t S e c re ta ry o f th e B oard. [s e a l] [FR Doc.72-20593 F iled ll-3 0 -7 2 ;8 :4 5 am ]