[Federal Register Volume 61, Number 165 (Friday, August 23, 1996)]
[Rules and Regulations]
[Pages 43636-43638]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-21488]


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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.

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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contain outdated legal concepts.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.
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    \1\ (Subpart D of Part 350 provided for issuance of definitive 
bills on an exception basis for a limited period of time.)
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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