Full text of Roundup : June 1986, Volume 5, Number 6

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DALLAS
Federal Reserve Bank of Dallas

June 1986

TREASURY DIRECT vs. TRADES
In July, the Treasury Department,
supported by the Federal Reserve
System, plans to implement
TREASURY DIRECT, a new book-entry
securities system for private sector
investors. TRADES (Treasury/Reserve
Automated Debt Entry System), which
is the commercial system already in
place, will operate alongside Treasury
Direct.
What will TREASURY DIRECT do for
your customers?

TREASURY DIRECT will provide
more security for investors because it
eliminates the possibility of cer­
tificates being lost or stolen. It will
also offer a number of new conven­
iences and special services to in­
vestors as well.
New features include simplified
and more accurate recordkeeping, a
broader choice of registration op­
tions, direct deposit of Treasury
payments, and an automatic reinvest­
ment option for Treasury bills begin­
ning in 1987.
Since TREASURY DIRECT elimi­
nates the issuance of physical
securities, risk of loss, theft, and
mishandling will be greatly reduced.
Reductions in the servicing costs
associated with these securities are
estimated to save the government $46
million over the next seven years.
Under the new TREASURY DIRECT
program, Treasury note and bond in­
vestors will receive a statement of
account instead of engraved cer­

tificates. The statement will provide a
record of their entire portfolio of
Treasury securities. (Treasury bill
holders should already be familiar
with the safety and security of a
book-entry system since T-bills have
been available only in this form for
some time now.)
All holdings, unless they are main­
tained under different registration op­
tions or have different payment in­
structions, will be held under a single
master account for simplified record­
keeping and flexibility. The account
statement concept is similar to the
computerized statements currently
issued by securities dealers to pur­
chasers of stocks and bonds and by
financial institutions to customers
who maintain a number of different
accounts.
With TREASURY DIRECT being a
nationwide automated system, in­
vestors can obtain information and
conduct transactions on their ac­
counts at Federal Reserve Banks or
the U.S. Treasury. There are 12
Federal Reserve Banks and 25
Branches which have been
designated as TREASURY DIRECT
servicing offices. This means in­
vestors can purchase Treasury bills,
notes or bonds, transfer securities
from one account to another, or re­
quest detailed information changes to
their accounts at any of the 37 loca­
tions. With each change in account
information, the investor will receive
an account statement as a record of

the actions taken.
Investors will have a broader choice
of registration options as well as the
ability to establish clear ownership
and survivorship rights to securities
with the TREASURY DIRECT system.
TREASURY DIRECT will offer in­
vestors the security of direct deposit
of refund, interest and principal
payments to the designated checking
or savings account at a financial in­
stitution of the investor’s choice.
Direct deposit eliminates the
possibility of stolen or lost checks
and gives investors immediate access
to their money.
For complete information and the
regulations governing TREASURY
DIRECT, see Department of the
Treasury Circular, Public Debt Series
No. 2 - 86 (31 CRF Part 357).
What will TRADES do for YOUR finan­
cial institution?

TRADES, or Treasury/Reserve
Automated Debt Entry System, is the
commercial counterpart to
TREASURY DIRECT. TRADES is made
up of a network of entities including
(Cont. on pg. 3)

INSIDE
■ REDSYS
■ PROXY INDEX
■ CORRECTION

REDSYS offered through RESPONSE
Some people actually think a
statistic is a statistic. Not so at the
Federal Reserve Bank of Dallas. The
Dallas Fed’s Statistics Department is
involved in various activities ranging
from providing public information on
banking statistics to supplying onetwelfth of the data used by the econo­
mists at the Board of Governors in
projecting the nation’s money supply.
Customized public information on
interest rates, deposits and other
money stock measures are available
by calling (214) 651-6394. Much of this
information can be obtained at no
charge, unless computer access or
research is involved.
The department staff, if asked,
would probably view their involvement
in collecting and analyzing data on
forty-eight different reports as their
primary function. The largest and
most well known of these reports is
the Report of Transaction Accounts,
Other Deposits and Vault Cash,
FR2900.
Each week, approximately sixteenhundred financial institutions in the
Eleventh District channel information
on reservable liabilities to the Dallas
FED. These data are used to
calculate required reserves and to
provide the Board of Governors and
the Federal Open Market Committee
(FOMC) with a prompt, accurate
estimate of the money supply (M1,
M2, and M3) for the formulation of
monetary policy.
A typical work week in the
Statistics Department entails meeting
nonnegotiable deadlines while ensur­
ing data quality. An important factor
in the work involves timely receipt of
the information which is often
hampered by mail delays. The best
way to ensure immediate receipt of
this crucial information is through
Remote Edited Deposits SYStem
(REDSYS).
For depository financial institutions
on-line with the FED through the

The Dallas Fed Statistics Department receives approximately 1600 FR2900 Reports per
week. REDSYS should curtail some of that mail flow.

RESPONSE network system, FR2900
data can be transmitted electronical­
ly. REDSYS enables reporters to enter
and validate their FR2900 data using
either a personal computer or a
dedicated terminal.
The REDSYS application does not
perform reserve calculations or allow
for daily transmission of FR2900 data;
however, obvious advantages to
FR2900 reporters are decreased
dependency on mail schedules, in­
creased flexibility to utilize personnel
more effectively, and earlier availabil­
ity of reserve maintenance position
data. Best of all, as a RESONSE user,
there is no additional cost associated
with the use of the REDSYS
application.
If you are interested in finding out
more about the REDSYS application,
or in obtaining public information on
banking statistics, please contact the
Statistics Department at (214)
651-6394.

Statistics Department employees may
verify financial institutions’ report figures
either over the telephone or online.

TRADES, cont.
Statistics Department
Processing Flow Chart

r ——1

EXPLANATIONS AND/OR REVISIONS

L,

DATA PREPARED
BY DPI AND
MAILED

REPORTS
RECEIVED BY
STATISTICS
DEPT.

the Federal Reserve Banks, financial
institutions and government security
dealers and brokers.
Depository financial institutions
which submit tenders for securities to
be held in book-entry form by the
Federal Reserve will be held in
TRADES.
Private sector investors may elect
to maintain their purchases of
securities in the commercial bookentry account of a financial
institution.
Private investors who submit
tenders through an institution have
two options: 1) to request the security
be held in safekeeping through the in­
stitution’s commercial book-entry ac­
count. As the custodian of the ac­
count, your institution would record
ownership information on its internal
records, or 2) to request the applica­
tion to purchase tender be submitted
through the Treasury or local Federal
Reserve office for the account to be
held in TREASURY DIRECT.
Securities may be transferred be­
tween accounts in TREASURY
DIRECT or from TREASURY DIRECT
to TRADES or vice versa under the
guidelines specified by the Depart­
ment of the Treasury. An account
master record must exist for the
receiving investor for transfers be­
tween TREASURY DIRECT accounts
or to TREASURY DIRECT accounts.
It should be noted that a transfer
involving a TREASURY DIRECT bookentry system account cannot be
made against payment.
Applications for securities held in
TRADES should be submitted on form
SEC 213 - Tender for Treasury
Notes/Bonds. If you need a copy of
the guidelines for TRADES transac­
tions, call the Public Affairs Depart­
ment at the Dallas Fed at (214)
651-6289 and ask for Circular 86-30.

Treasury sets proxy index
Since the termination of the
Depository Institutions Deregulation
Committee (DIDC), the U.S. Treasury
no longer computes or announces a
two-and-a-half-year yield curve.
For institutions with loans or
obligations tied to that curve, the U.S.
Treasury department has set up a
proxy to replace the two-and-a-halfyear, five-day yield curve.
A spokesperson at the U.S.
Treasury office in Washington, D.C.
said the proxy is a “reasonable
substitute.” The proxy is an average
of the two- and three-year constant
maturity rates which are also
calculated by the Treasury.
Constant maturity rates are indexes
computed from statistics on actively
traded Treasury securities reported by
five of the leading U.S. government
security dealers. These constant
maturities, which range from one-year
to 30-years, are used by some finan­
cial institutions as well as mortgage

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companies for establishing ad­
justable rate mortgage payments.
Here is the computation that will
get you the current weekly proxy
figure: for a given week, average the
two- and three-year constant maturity
rates from the preceding Tuesday
through Friday, with the average of
the two- and three-year constant
maturity rates for the Monday of the
week which the rate is desired.
Federal Reserve Banks’ Public Af­
fairs Departments get the weekly
statistical release (H.15) each Tues­
day (unless Monday is a holiday)
which includes the prior week’s rates
and indexes. The U.S. Treasury must
be called for the latest Monday
figures on the two- and three-year
constant maturity rates. The number
to call at the Treasury for those Mon­
day rates is (202) 566-5204.
To receive figures for the four
preceding working days, call your
Federal Reserve Bank’s Public Affairs

Department. The Dallas Office
numbers are (214) 651-6222 or
1-800-442-7140, extension 6222.
Should financial institutions wish
to receive the information in
statistical release form on a regular
basis, they should contact the Board
of Governors at (202) 452-3244 and
ask to be placed on the H.15 mailing
list.

i

CORRECTION
In the May 1986 issue of Roundup,
in the “Security controls addressed”
story, a figure was incorrectly
reported. The story stated that $100
billion is lost annually in financial
transactions of which 83 percent is
lost through electronic funds
transfers, while 12 percent is lost
through checks and only five percent
through cash transactions. The dollar
amount should have been $100
million.

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