[Federal Register Volume 73, Number 55 (Thursday, March 20, 2008)]
[Rules and Regulations]
[Pages 14937-14939]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-5713]


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DEPARTMENT OF THE TREASURY

Fiscal Service

31 CFR Part 356

[Docket No. BPD GSRS 08-01]


Sale and Issue of Marketable Book-Entry Treasury Bills, Notes, 
and Bonds--Minimum and Multiple Amounts Eligible for STRIPS, Legacy 
Treasury Direct, and Certification Requirements

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

ACTION: Final rule.

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SUMMARY: The Department of the Treasury (``Treasury'' or ``We'') is 
issuing in final form amendments to the Uniform Offering Circular for 
the Sale and Issue of Marketable Book-Entry Treasury Bills, Notes, and 
Bonds. The first change lowers the minimum and multiple par amounts of 
Treasury marketable notes, bonds, and Treasury inflation-protected 
securities (TIPS) that may be stripped from $1,000 to $100. The second 
change eliminates the provisions allowing depository institutions and 
dealers to submit customer bids in Treasury marketable securities 
auctions for securities that will be held in Legacy Treasury Direct. 
The third change eliminates the requirement that submitters that submit 
bids by computer provide a written certification that they are in 
compliance with the auction rules. Finally, this final rule adds 
technical clarification to the calculation of accrued interest for 
Treasury bonds and notes.

DATES: Effective Date: This rule is effective on March 20, 2008.
    Applicability Date: The changes to 31 CFR 356.31 apply to all 
Treasury marketable securities eligible for stripping (notes, bonds, 
plus TIPS issued after January 15, 1985) outstanding on and after April 
7, 2008.
    Applicability Date: The change to 31 CFR Part 356, Appendix B, 
Section I, Paragraph C applies to all Treasury notes, bonds, and TIPS 
issued on or after the date of the first Treasury marketable securities 
auction with a $100 minimum purchase amount announced through an 
offering announcement.
    Applicability Date: The changes to 31 CFR 356.2, 356.4, 356.16, 
356.17 and 356.25 apply to all auctions of Treasury marketable 
securities beginning with the first Treasury marketable securities 
auction with a $100 minimum purchase amount announced through an 
offering announcement.

ADDRESSES: You may download this final rule from the Bureau of the 
Public Debt's Web site at http://www.treasurydirect.gov or from the 
Electronic Code of Federal Regulations (e-CFR) Web site at http://www.gpoaccess.gov/ecfr. It is also available for public inspection and 
copying at the Treasury Department Library, Room 1428, Main Treasury 
Building, 1500 Pennsylvania Avenue, NW., Washington, DC 20220. To visit 
the library, call (202) 622-0990 for an appointment.

FOR FURTHER INFORMATION CONTACT: Lori Santamorena (Executive Director), 
Chuck Andreatta (Associate Director), or Aaron Gregg (Government 
Securities Specialist), Bureau of the Public Debt, Government 
Securities Regulations Staff, (202) 504-3632 or e-mail us at 
[email protected]. Policy Information: Karthik Ramanathan 
(Director), Department of the Treasury, Office of Debt Management, 
(202) 622-2042 or e-mail at [email protected].

SUPPLEMENTARY INFORMATION: The Uniform Offering Circular (UOC), in 
conjunction with the announcement for each auction, provides the terms 
and conditions for the sale and issuance to the public of marketable 
Treasury bills, notes, bonds and TIPS.\1\
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    \1\ The Uniform Offering Circular was first published as a final 
rule on January 5, 1993 (58 FR 412). The circular, as amended, is 
codified at 31 CFR part 356. A final rule converting the UOC to 
plain language and making certain other minor changes was published 
on July 28, 2004 (69 FR 45202).

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[[Page 14938]]

    This final rule revises 31 CFR 356.31 of the UOC, which describes 
the terms and conditions for STRIPS (Separate Trading of Registered 
Interest and Principal of Securities). The STRIPS program allows 
holders of book-entry (electronic) Treasury notes, bonds, and TIPS to 
separate those securities into their separate principal and interest 
components. Holders then can hold or trade these components separately 
as zero-coupon securities. Currently, the minimum par amount of notes, 
bonds, and TIPS that may be stripped is $1,000,\2\ and any higher par 
amount to be stripped must be in a multiple of $1,000.
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    \2\ See 65 FR 66174 (November 3, 2000) for a previous UOC 
amendment to minimum and multiple par amounts that may be stripped.
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    On August 1, 2007, Treasury announced that it was considering 
lowering the minimum and multiple par amounts that bidders may bid for 
in Treasury marketable securities auctions from $1,000 to $100 to put 
Treasury securities within the reach of all individual investors.\3\ On 
October 31, 2007, Treasury announced that it will lower the minimum 
purchase amounts for Treasury auctions from $1,000 to $100 after the 
release of the new auction processing system.\4\ This will also allow 
holders to hold and transfer all outstanding Treasury bills, notes, 
bonds, and TIPS in minimum and multiple par amounts of $100. The 
announced change does not require a change to the UOC because it will 
be incorporated in each auction announcement.\5\
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    \3\ See August 2007 Quarterly Refunding Statement by Anthony W. 
Ryan, Treasury Assistant Secretary for Financial Markets (August 1, 
2007) http://www.treas.gov/press/releases/hp515.htm.
    \4\ See November 2007 Quarterly Refunding Statement by Anthony 
W. Ryan, Treasury Assistant Secretary for Financial Markets (October 
31, 2007) http://www.treas.gov/press/releases/hp655.htm.
    \5\ See 31 CFR 356.2, which defines ``minimum to bid'' and 
``multiple to bid'' as ``the smallest amount of a security that may 
be bid for in an auction as stated in the auction announcement'' and 
``the smallest additional amount of a security that may be bid for 
in an auction as stated in the auction announcement,'' respectively.
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    This final rule makes the minimum and multiple par amounts of 
Treasury notes, bonds, and TIPS eligible to be stripped consistent with 
the lower minimum and multiple par amounts that bidders may bid for in 
marketable Treasury securities auctions. The change to the minimum and 
multiple par amounts eligible to be stripped (31 CFR 356.31) will apply 
on April 7, 2008, and thereafter to all outstanding Treasury marketable 
securities eligible for stripping (notes, bonds, plus TIPS issued after 
January 15, 1985).
    The final rule also eliminates the provisions allowing depository 
institutions and dealers to submit customer bids in Treasury marketable 
securities auctions for securities that will be held in Legacy Treasury 
Direct (31 CFR 356.2, 356.4, 356.17, and 356.25). This functionality is 
not available in the new Treasury Automated Auction Processing System 
(TAAPS). Our experience has been that the volume of such bids has been 
so low that it does not justify continuing to provide the service in 
the new TAAPS. Investors will still be able to submit their own bids 
directly to Legacy Treasury Direct.
    This final rule also eliminates the requirement that submitters 
that submit bids by computer provide a written certification that they 
are in compliance with the auction rules, because it is unnecessary in 
view of other requirements. The current UOC states that, by submitting 
bids or other information in an auction, submitters are deemed to have 
certified that they are in compliance with the auction rules; that the 
information provided regarding any bids for their own account is 
accurate and complete; and that the information provided with regard to 
any bids for customers accurately and completely reflects information 
provided by those customers or their intermediaries (31 CFR 356.16(a)). 
The new TAAPS will also state on the login screen that, by bidding in 
an auction, bidders are certifying that they will comply with the 
auction rules.
    In addition, this final rule adds language to Appendix B, Section 
I, Paragraph C of the UOC to specify how we calculate accrued interest 
for a par amount of securities less than $1,000.

Procedural Requirements

    This final rule is not a significant regulatory action for purposes 
of E.O. 12866. The notice and public procedures requirements of the 
Administrative Procedure Act do not apply, under 5 U.S.C. 553(a)(2).
    Since a notice of proposed rulemaking is not required, the 
provisions of the Regulatory Flexibility Act (5 U.S.C. 601 et seq.) do 
not apply.

List of Subjects in 31 CFR Part 356

    Bonds, Federal Reserve System, Government Securities, Securities.

0
For the reasons stated in the preamble, 31 CFR part 356 is amended as 
follows:

PART 356--SALE AND ISSUE OF MARKETABLE BOOK-ENTRY TREASURY BILLS, 
NOTES, AND BONDS (DEPARTMENT OF THE TREASURY CIRCULAR, PUBLIC DEBT 
SERIES NO. 1-93)

0
1. 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.


0
2. Amend Sec.  356.2 to revise the definition of ``Autocharge 
agreement'' to read as follows:


Sec.  356.2  What definitions do I need to know to understand this 
part?

* * * * *
    Autocharge agreement means an agreement in a format acceptable to 
Treasury between a submitter or clearing corporation and a depository 
institution that authorizes us to:
    (1) Deliver awarded securities to the book-entry securities account 
of a designated depository institution in the commercial book-entry 
system, and
    (2) Charge a funds account of a designated depository institution 
for the settlement amount of the securities.
* * * * *
0
3. Amend Sec.  356.4 to revise paragraph (c) as follows:


Sec.  356.4  What are the book-entry systems in which auctioned 
Treasury securities may be issued?

* * * * *
    (c) Legacy Treasury Direct. In this system, we maintain the book-
entry securities of account holders directly on the records of the 
Bureau of the Public Debt, Department of the Treasury. Bids for 
securities to be held in Legacy Treasury Direct are submitted directly 
to us. From time to time, Treasury may announce that certain securities 
to be offered will not be eligible for purchase or holding in Legacy 
Treasury Direct.


Sec.  356.16  [Amended]

0
4. In Sec.  356.16, remove paragraph (a)(4).
0
5. Amend Sec.  356.17 to revise paragraph (c)(1) to read as follows:


Sec.  356.17  How and when do I pay for securities awarded in an 
auction?

* * * * *
    (c) * * *
    (1) Bidding and payment by computer or by telephone. If you are 
bidding by computer or by telephone, you must pay for any securities 
awarded to you by debit entry to a deposit account.
* * * * *
0
6. Amend Sec.  356.25 to revise paragraph (b) to read as follows:

[[Page 14939]]

Sec.  356.25  How does the settlement process work?

* * * * *
    (b) Payment by authorized charge to a funds account. Where the 
submitter's method of payment is an authorized charge to the funds 
account of a depository institution as provided for in Sec.  356.17 
(d), we will charge the settlement amount to the specified funds 
account on the issue date.
* * * * *
0
7. Amend Sec.  356.31 to revise paragraphs (b)(1) and (c)(1) to read as 
follows:


Sec.  356.31  How does the STRIPS program work?

* * * * *
    (b) * * *
    (1) Minimum par amounts required for STRIPS. The minimum par amount 
of a fixed-principal security that may be stripped is $100. Any par 
amount to be stripped above $100 must be in a multiple of $100.
* * * * *
    (c) * * *
    (1) Minimum par amounts required for STRIPS. The minimum par amount 
of an inflation-protected security that may be stripped is $100. Any 
par amount to be stripped above $100 must be in a multiple of $100.
* * * * *
0
8. Amend Appendix B to part 356 by revising Section I, Paragraph C, 
Subparagraph 4, to read as follows:

Appendix B to Part 356--Formulas and Tables

* * * * *

C. Accrued Interest

* * * * *
    4. We round all accrued interest computations to five decimal 
places for a $1,000 par amount, using normal rounding procedures. We 
calculate accrued interest for a par amount of securities greater 
than $1,000 by applying the appropriate multiple to accrued interest 
payable for a $1,000 par amount, rounded to five decimal places. We 
calculate accrued interest for a par amount of securities less than 
$1,000 by applying the appropriate fraction to accrued interest 
payable for a $1,000 par amount, rounded to five decimal places.
* * * * *

Gary Grippo,
Acting Fiscal Assistant Secretary.
 [FR Doc. E8-5713 Filed 3-19-08; 8:45 am]
BILLING CODE 4810-39-P