Conforming Book-entry Changes

DEPARTMENT OF THE TREASURY

Fiscal Service

31 CFR Parts 306, 350, 356, and 358

Conforming Book-entry Changes

AGENCY: Bureau of the Public Debt, Fiscal Service, Treasury.

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: The Department of the Treasury is publishing final regulations

to conform existing miscellaneous regulatory provisions to new

regulations governing book-entry Treasury Bonds, Notes and Bills that

are being published as a separate rulemaking document on this date. The

changes are technical and non-substantive.

EFFECTIVE DATE: January 1, 1997.

FOR FURTHER INFORMATION CONTACT:

Walter T. Eccard, Chief Counsel (202) 219-3320, or Cynthia E. Reese,

Deputy Chief Counsel, (202) 219-3320. Copies of the final regulations

are being made available for downloading from the Bureau of the Public

Debt home page at the following address: http://www.ustreas.gov/

treasury/bureaus/pubdebt/pubdebt.html.

SUPPLEMENTARY INFORMATION: In a separate publication in this Federal

Register, the Department of the Treasury is publishing a final rule

that, on and after the effective date, will govern Treasury bonds,

notes, and bills (Treasury securities) in book-entry form held in the

commercial book-entry system (31 CFR Part 357). That rule incorporates

by reference recent and significant changes in commercial law

addressing the holding of securities in book-entry form through

intermediaries. The rule replaces existing Treasury regulations that

contain outdated legal concepts.

In this rulemaking document, existing Treasury regulations are

being amended to conform to the changes in Part 357. No other changes

of a substantive nature are being made. These various technical changes

are summarized below.

Part 306

Subpart O of Part 306 contains the provisions governing book-entry

Treasury securities that have been in effect for over twenty years.

Almost all of these provisions, including those dealing with transfer

and pledge, are being supplanted by the new regulations in 31 CFR Part

357, Subpart B (the ``TRADES'' regulations). The only provisions that

will continue to have any force on and after the effective date are

those dealing with the procedures for withdrawal of securities from

book-entry. Those provisions only apply to securities issued before

August 15, 1986, which were offered in definitive (certificated) form.

In revised Sec. 306.115, a new definition of ``Eligible book-entry

Treasury security'' has been added and the definition of ``Definitive

Treasury security'' is being retained, but otherwise the definitions in

31 CFR Sec. 357.3 will apply. Revised Sec. 306.117 contains the rules

for withdrawal of Eligible book-entry Treasury securities for

conversion to definitive form. It is based on provisions in former

Secs. 306.118(d) and (f) and 306.119. All other provisions of current

Subpart O are covered by TRADES or are obsolete.

Part 350

This Part contained the regulations governing Treasury bills that

were offered exclusively in book-entry form, beginning in 1976.\1\

Subpart C of Part 350, which related to direct access Treasury bill

accounts, was superseded by the TREASURY DIRECT regulations in Part

357, Subpart C. Subpart B of Part 350, which related to Treasury bills

held in the commercial book-entry system, was applicable until

promulgation in 1993 of the uniform offering circular, 31 CFR Part 356

(Sale and Issue of Book-Entry Treasury Bills, Notes, and Bonds,

Department of the Treasury Circular, Public Debt Series No. 1-93).

Under Secs. 356.3 and 356.5, Treasury bills were made subject to 31 CFR

Part 306 and 357. Because Treasury bills have a maturity of no longer

than one year, there are currently no unmatured Treasury bills subject

to Part 350. Therefore, Part 350 is being removed.

---------------------------------------------------------------------------

\1\ (Subpart D of Part 350 provided for issuance of definitive

bills on an exception basis for a limited period of time.)

---------------------------------------------------------------------------

Part 356

All of the changes in this Part either replace references to 31 CFR

Part 306 with Part 357, or add references to TRADES.

Part 358

One change is being made to Section 358.3 to delete language that

will no longer apply as a result of the publication of TRADES.

Procedural Requirements

This rulemaking does not meet the criteria for a ``significant

regulatory

[[Page 43637]]

action'' pursuant to Executive Order 12866. The notice and public

comment procedures requirements of the Administrative Procedure Act are

inapplicable, pursuant to 5 U.S.C. 553(a)(2). As no notice of proposed

rulemaking is required, the provisions of the Regulatory Flexibility

Act (5 U.S.C. 601, et seq.) do not apply.

There are no collections of information contained in this

rulemaking. Therefore, the Paperwork Reduction Act does not apply.

List of Subjects in 31 CFR Parts 306, 350, 356, and 358

Bonds, Federal Reserve System, Government securities, Securities.

For the reasons set forth in the preamble and under the authority

of 31 U.S.C. 3121, 31 CFR chapter II is amended as follows:

PART 306--GENERAL REGULATIONS GOVERNING U.S. SECURITIES

1. The authority citation for part 306 continues to read as

follows:

Authority: 31 U.S.C. chapter 31; 5 U.S.C. 301; 12 U.S.C. 391.

2. Section 306.115 is revised to read as follows:

Sec. 306.115 Definition of terms.

For the purposes of this subpart, the definitions provided in 31

CFR 357.3 are applicable, with the following additions:

Definitive Treasury security means a Treasury bond, note,

certificate of indebtedness, or bill issued under 31 U.S.C. chapter 31

in engraved or printed form.

Eligible book-entry Treasury security means a security maintained

in TRADES that was originally issued prior to August 15, 1986, which by

the terms of its offering circular is available in either definitive or

book-entry form.

3. Section 306.116 is removed and Sec. 306.117 is redesignated as

Sec. 306.116 and revised to read as follows:

Sec. 306.116 Scope and effect of book-entry procedure.

(a) Except as provided in Sec. 306.117, the provisions of 31 CFR

part 357, subparts A, B, and D apply.

(b) This subpart is effective January 1, 1997.

4. Section 306.118 is removed and Sec. 306.119 is redesignated as

Sec. 306.117 and revised to read as follows:

Sec. 306.117 Withdrawal of eligible book-entry Treasury securities for

conversion to definitive form.

(a) Eligible book-entry Treasury securities may be withdrawn from

TRADES by requesting delivery of like definitive Treasury securities.

(b) A Reserve bank shall, upon receipt of appropriate instructions

to withdraw eligible book-entry Treasury securities from book-entry

form in TRADES, convert such securities into definitive Treasury

securities and deliver them in accordance with such instructions; no

such conversion shall affect existing interests in such Treasury

securities.

(c) All requests for withdrawal of eligible book-entry Treasury

securities must be made prior to the maturity or date of call of the

securities.

(d) Treasury securities which are to be delivered upon withdrawal

may be issued in either registered or bearer form, to the extent

permitted by the applicable offering circular.

5. Sections 306.120, Sec. 306.121, Sec. 306.122, and the Appendix

to subpart 0 are removed.

PART 350--REGULATIONS GOVERNING BOOK-ENTRY BILLS--[REMOVED]

6. Part 350 is removed.

PART 356--SALE AND ISSUE OF MARKETABLE BOOK-ENTRY TREASURY BILLS,

NOTES, AND BONDS

7. The authority citation for part 356 continues to read as

follows:

Authority: 5 U.S.C. 301; 31 U.S.C. 3102 et seq.; 12 U.S.C. 391.

8. Section 356.2 is amended by adding the following definition in

alphabetical order:

Sec. 356.2 Definitions.

* * * * *

TRADES means the Treasury/Reserve Automated Debt Entry System.

* * * * *

9. Section 356.3 is amended by revising the introductory text and

the first sentence of paragraph (a) to read as follows:

Sec. 356.3 Book-entry securities and systems.

Securities issued subject to this part shall be held in either of

two systems for maintaining book-entry securities, as described.

Securities may be transferred from one system to the other in

accordance with Treasury regulations governing book-entry Treasury

bills, notes and bonds. See Department of the Treasury Circular, Public

Debt Series No. 2-86, as amended (31 CFR part 357).

(a) Treasury/Reserve Automated Debt Entry System (TRADES). TRADES

is established, maintained and operated by the Federal Reserve Banks

acting as fiscal agents of the United States, pursuant to 12 U.S.C.

391. * * *

* * * * *

10. Section 356.5 is amended by revising the first two sentences in

its introductory text to read as follows:

Sec. 356.5 Description of securities.

Securities offered pursuant to this part are offered exclusively in

book-entry form and are direct obligations of the United States, issued

under chapter 31 of title 31 of the United States Code. The securities

are subject to the terms and conditions set forth in this part, as well

as the regulations governing book-entry Treasury bills, notes, and

bonds (31 CFR part 357) and the offering announcements, all to the

extent applicable. * * *

* * * * *

11. Section 356.11 is amended by revising the first sentence of

paragraph (a)(2) to read as follows:

Sec. 356.11 Submission of bids.

(a) * * *

(2) If the awarded securities are to be issued in TRADES, a

submitter must have on file at a Federal Reserve Bank a certificate

listing those persons who are authorized to submit tenders on its

behalf. * * *

* * * * *

12. Section 356.17(b) is revised to read as follows:

Sec. 356.17 Responsibility for payment.

* * * * *

(b) TRADES. For securities held in TRADES, payment of the par

amount and announced accrued interest, if any, must be submitted with

the tender unless provision has been made for payment by charge to the

funds account of a depository institution.

* * * * *

13. Section 356.31 is amended by revising the first sentences of

both paragraphs (a) and (c) and all of paragraph (d) to read as

follows:

Sec. 356.31 STRIPS.

(a) General. A note or bond may be designated in the offering

announcement as eligible for the STRIPs program. At the option of the

holder, and generally at any time from its issue date until its call or

maturity, any such security may be ``stripped'' i.e., divided into

separate principal and interest components maintained in TRADES. * * *

* * * * *

(c) Reconstituting a security. Stripped interest and principal

components may be reconstituted, i.e. restored to their fully

constituted form, and maintained in TRADES. * * *

[[Page 43638]]

(d) Applicable regulations. Unless otherwise provided in this part,

notes and bonds stripped into their STRIPS components are governed by

subparts A, B and D of part 357 of this chapter.

PART 358--REGULATIONS GOVERNING CUBES (COUPONS UNDER BOOK-ENTRY

SAFEKEEPING)

14. The authority citation for part 358 continues to read as

follows:

Authority: 31 U.S.C. chapter 31; 12 U.S.C. 391.

15. Section 358.3 is revised to read as follows:

Sec. 358.3 Governing regulations.

CUBES are deemed to be securities for purposes of subparts A, B,

and D of part 357 of this chapter.

Dated: August 16, 1996.

Gerald Murphy,

Fiscal Assistant Secretary.

[FR Doc. 96-21488 Filed 8-20-96; 1:29 pm]

BILLING CODE 4810-39-P