Full text of Federal Reserve Bank of New York Circulars : 8301. Changes in the Criteria for Listing OTC Margin Stocks

The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.

FED ER AL RESERVE BANK
OF NEW YORK
No. 8 3 0 1 1
[ Circular
March 23, 1978
J

CHANGES IN THE CRITERIA FOR LISTING OTC MARGIN STOCKS
Proposed Amendments to Regulations G, T, and U
To A ll Persons Extending Securities Credit
in the Second Federal Reserve District:

Following is the text of a statement issued by the Board of Governors of the Federal Reserve
System:
The Board of Governors of the Federal Reserve System today proposed a change in requirements for
inclusion of stocks in the Board’s list of Over the Counter (OTC) Stocks that are subject to margin require­
ments.
The Board asked for comment by April 14, 1978.
The proposal would require that, to be included among stocks on the Board’s OTC list, dealers in the
stock must submit b on a fid e bids and offers for the stock to an automated quotation system such as NASDAQ
(National Association of Securities Dealers Automated Quotations—linking major brokers throughout the
country). Currently, stocks included on the list are those for which dealers regularly publish b o m fid e bids and
offers.

The text of the proposed amendments to Regulations G, T, and U is reprinted below from the
Federal Register. Comments thereon should be submitted by April 14, and may be sent to the Reg­
ulations Division of our Consumer Affairs and Bank Regulations Department.
P a u l A. V o l c k e r ,
President.

[Regs. G, T, and U]
(Docket No. R-0147)

SECURITIES CREDIT TRANSACTIONS
OTC List Requirements

[6 2 1 0 -0 1 ]
FEDERAL RESERVE SYSTEM
[1 2 CFR Parts 207f 220, 2 2 1 ]

[Regs. O , T . U; Docket No. R-0147]
OTC LIST REQUIREMENTS
Proposed Rule

AGENCY: Board of G overnors o f th e
Federal R eserve System .
ACTION: Proposed rule.
SUMMARY: T h ese proposed am end­
m en ts to th e Supplem ents to R egu la­
tions G, T and U w ill require th a t
dealers m ust subm it bona fide bids
and offers for an OTC stock to an
autom ated quotation system if th ey
are to be counted as m arket-m akers in
th a t stock for th e purpose of being in­
cluded on th e Board’s List o f OTC
M argin Stocks. T h e m inim um m arket
m aker requirem ents for a stock to be
included on th e List under th e present
rule recognizes th ose dealers w ho
m ake “regularly published bona fide
bids and offers for such stock.” W hen
th e List was first published by th e
Board in 1969 th e "pink sh ee ts” o f th e
N ational Q uotation Bureau w ere th e
only con sisten t source of th e required
price inform ation. Since th a t tim e an



autom ated quotation system , th e N a­
tional A ssociation of Security D ealers
A utom ated Q uotations (NASDAQ),
has been developed to a point w here
price inform ation on all stocks on th e
Board’s list can now be obtained from
it. T h e Board is p resen tly using data
from b oth th e “pink sh e e ts” and
NASDAQ for its surveys.
T h e proposed am endm ent will elim i­
nate th e n ecessity of reviewing data
from th e “pink sh ee ts” m ost of w hich
is considered duplicative and reduce
sta ff review and com puter tim e.
DATE: Com m ents m ust be received on
or before April 14, 1978.
ADDRESS: Secretary, Board of G ov­
ernors of th e Federal R eserve System ,
W ashington, D.C. 20551.
FO R
FU R T H ER
INFORM ATION
CONTACT:
Laura Homer, C hief A ttorney, S ecu­
rities R egulation, D ivision of Bank­
ing Supervision and R egulation,
Board of Governors of th e Federal
R eserve System , W ashington, D.C.
20551, 202-452-2781.
SUPPLEM ENTARY INFORM ATION:
T h e Board proposes to am end th e
Supplem ents to R egulations G, T and
U (12 CFR Parts 207, 220 and 221) to
elim inate th e n ecessity o f reviewing
data from th e "pink sh ee ts” w hen sur­

veying stocks for inclusion on th e
Board’s List o f OTC m argin Stocks.
M ost of th e data is now duplicative of
m aterial from NASDAQ, and review­
ing it requires an expenditure o f sta ff
and com puter tim e no longer deem ed
necessary to com plete th e analysis re­
quired in surveying th e stocks eligible
for th e Board’s List. Further, an anal­
ysis o f available price inform ation in­
dicates th a t NASDAQ is th e m ost con­
venient and com plete source of bid
and offer data for more actively
traded OTC stocks in addition to sup­
plying oth er needed data w hich are
unavailable from th e “pink sh eets.”
T h e proposed am endm ents will perm it
th e Board to use survey data from
NASDAQ only.
Accordingly, pursuant to sections 7
and 23 o f th e Securities Exchange Act
of 1934, as am ended (15 U.S.C. 78 g
and w) th e Board proposes to amend
1 2 CFR Parts 207, 220, and 221 as fo l­
lows:
PART 207— SECURITIES CREDIT BY
PERSONS OTHER THAN BANKS,
BROKERS, OR DEALERS

1. S ection 207.5(d)(2) and 207.5(e)(2)
of Part 207, S ecurities Credit by Per­
sons other th a n Banks, Brokers or
D ealers, would be am ended as follows:
( over )

§ 207.5 Supplement

§ 220.8 Supplement

(2)
Four or m ore dealers stand w ill­
ing to, and do in fact, m ake a m arket
in such stock and regularly subm it
•
•
*
•
*
(h ) R equirem ents f o r in clu sio n on bona fide bids and offers to an auto­
L is t o f O TC m argin stock. * * *
(d) R equirem ents fo r in clu sio n on
m ated quotations system for their own
(2)
Pour or more dealers stand w ill­ accounts, or th e stock is registered on
L is t o f O TC m argin stock. * * *
ing
to,
and
do
in
fact,
m
ake
a
m
arket
(2)
Four or m ore dealers stand w ill­
a securities exchange th a t is exem pted
in su ch stock and regularly subm it by th e Securities and Exchange Com­
ing to, and do in fact, m ake a m arket
bona fide bids and offers to an auto­ m ission from registration as a national
in such stock and regularly subm it
m ated quotations system for th eir own securities exchange pursuant to sec­
bona fide bids and offers to an auto­
accounts, or th e stock is registered on tion 5 of th e Securities Exchange Act
m ated quotations system for th eir own
a securities exchan ge th a t is exem pted o f 1934 (15 U.S.C. 78e).
accounts, or th e stock is registered on
by th e Securities and .Exchange Com­
a securities exchan ge th a t is exem pted
m ission from registration as a n ational
•
•
•
•
•
by th e Securities and E xchan ge Com­
securities exchan ge pursuant to sec­
m ission from registration as a national
(e)
R equirem ents fo r co n tin u ed in ­
tion 5 of th e Securities Exchange A ct
securities exchan ge pursuant to sec­
clusion on L ist o f OTC m argin stock.
of 1934 (15 U.S.C. 78e).
•
*
*
tion 5 o f th e Securities E xchan ge Act
•
•
•
•
•
of 1934 (15 U.S.C. 78e).
(2)
T hree or m ore dealers stand will­
(i) R equirem ents f o r co n tin u ed in ­ ing to, and do in fact, m ake a m arket
clusion on L is t o f O TC m argin stock. in such stock and regularly subm it
*
*
*
*
*
• • •
bona fide bids and offers to an auto­
(e) R equirem ents for continued in­
(2)
T hree or more dealers stand w ill­ m ated quotations system for their own
clusion on List of OTC m argin stock.
ing to, and do in fact, m ake a m arket accounts, or th e stock is registered on
in su ch stock and regularly subm it a securities exchange th a t is exem pted
*
•
*
*
•
bona fide bids and offers to an auto­ by th e Securities and Exchange Com­
(2)
T hree or m ore dealers stand w ill­ m ated quotations system for th eir own m ission from registration as a national
accounts, or th e stock is registered on securities exchan ge pursuant to sec­
in g to, and do in fact, m ake a m arket
a securities exchange th a t is exem pted tion 5 of th e Securities Exchange Act
in such stock and regularly subm it
by th e Securities and Exchange Com­ of 1934 (15 U.S.C. 78e).
bona fide bids and offers to an auto­
m ission from registration as a national
To aid in consideration of this
m ated quotations system for th eir own
securities exchan ge pursuant to sec­ m atter by th e Board, interested per­
accounts, or th e stock is registered on
tion 5 of th e Securities Exchange Act sons are invited to subm it relevant
a securities exchan ge th a t is exem pted
of 1934 (15 U.S.C. 78e).
data, views, com m ents, or argum ents.
by th e Securities and E xchan ge Com­
A ll m aterial should include th e docket
m ission from registration as a national
PART 221— CREDIT BY BANKS FOR num ber R -0147. Such m aterial will be
securities exch an ge pursuant to sec
tion 5 o f th e Securities E xchange Act
THE PURPOSE OF PURCHASING OR m ade available for inspection and
copying upon request, excep t as pro­
o f 1934 (15 U.S.C. 78e).
CARRYING M A RG IN STOCKS
vided in § 261.6(a) of th e Board’s R ules
3.
S ection 221.4(d)(2) and 221.4(e)(2)R egarding A vailability of Inform ation
of Part 221, Credit by Banks for th e (12 CFR 261.6(a)).
Purpose o f Purchasing or Carrying
PART 220— CREDIT BY BROKERS A ND
Margin Stocks, would be am ended as
B y order of th e Board of Governors,
follows:
DEALERS2
March 13, 1978.
•

•

•

•

«

§ 221.4 Supplement.

2. S ection 220.8(hM2) and 220.8(i)(2)
•
•
•
•
•
of Part 220, Credit by Brokers and
D ealers, would be am ended as set
(d)
R equirem ents fo r in clu sio n on
forth below:
L is t o f OTC m argin stock. * * *




T heodore E. A l l iso n ,

S ecretary o f the Board.
[FR Doc. 78-7204 Filed 3-14-78; 5:10 pm]

FEDERAL REGISTER, V O L 43, HO . 53— FRIDAY, MARCH 17, 197S