[Federal Register Volume 79, Number 237 (Wednesday, December 10, 2014)]
[Rules and Regulations]
[Pages 73408-73423]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-28734]



[[Page 73407]]

Vol. 79

Wednesday,

No. 237

December 10, 2014

Part II





Department of the Treasury





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17 CFR Part 420





Government Securities Act Regulations: Large Position Reporting Rules; 
Final Rule

  Federal Register / Vol. 79, No. 237 / Wednesday, December 10, 2014 / 
Rules and Regulations  

[[Page 73408]]


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DEPARTMENT OF THE TREASURY

17 CFR Part 420

[Docket No. Treas-DO-2014-0002]


Government Securities Act Regulations: Large Position Reporting 
Rules

AGENCY: Office of the Assistant Secretary for Financial Markets, 
Treasury.

ACTION: Final rule.

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SUMMARY: The Department of the Treasury (Treasury) is amending its 
rules for reporting large positions in certain Treasury securities. The 
large position reporting rules are issued under the Government 
Securities Act (GSA) for the purposes of monitoring the impact in the 
Treasury securities market of concentrations of positions in Treasury 
securities and otherwise assisting the Securities and Exchange 
Commission (SEC) in enforcing the GSA. In addition, the large position 
reports provide Treasury with information to better understand supply 
and demand dynamics in certain Treasury securities. These amendments 
are designed to improve the information available to Treasury and 
simplify the reporting process for many entities subject to the large 
position reporting rules.

DATES: The amendments will become effective March 10, 2015.

ADDRESSES: This final rule is available at http://www.treasurydirect.gov and http://www.regulations.gov. It is also 
available for public inspection and copying at the Treasury Department 
Library, Treasury Annex Room 1020, 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, 
or Kevin Hawkins, Government Securities Advisor, Department of the 
Treasury, Bureau of the Fiscal Service, Government Securities 
Regulations Staff, (202) 504-3632 or email us at 
[email protected].

SUPPLEMENTARY INFORMATION: Treasury is amending the large position 
reporting (LPR) rules to improve the information reported so that we 
can better understand supply and demand dynamics in certain Treasury 
securities. Specifically, the amendments: (1) Eliminate the exemptions 
for foreign central banks, foreign governments, and international 
monetary authorities (collectively ``foreign official organizations'') 
and request that these entities, as well as U.S. Federal Reserve Banks 
for their own account, voluntarily submit large position reports 
(Reports) when they meet or exceed a reporting threshold; (2) replace 
the current $2 billion minimum reporting threshold with a percentage 
standard; (3) establish an additional reporting threshold for the 
number of futures, options on futures, and exchange-traded options 
contracts controlled by the reporting entity for which the specified 
Treasury security is deliverable; (4) replace the concept of the 
``reportable position'' with a requirement that defined reporting 
entities \1\ must file a Report if any one of eight criteria is met; 
(5) revise the format for the reporting of positions in the specified 
Treasury security and establish a two-column format for the reporting 
of gross ``obligations to receive'' and gross ``obligations to 
deliver'' as well as the gross quantity of securities borrowed and the 
gross quantity of securities lent; (6) expand the components of a 
position to include futures, options on futures, and options (both 
exchange-traded and over-the-counter) and establish a two-column format 
for reporting net positions in these contracts; (7) provide an option 
for a reporting entity to identify the type(s) of business it engages 
in and to identify its overall investment strategy with respect to 
positions in the specified Treasury security; and (8) consolidate 
relevant guidance in the LPR rules.
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    \1\ 17 CFR 420.2.
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    These amendments reflect Treasury's continuing need to obtain 
relevant information from reporting entities while minimizing the cost 
and burden on those entities affected by the regulations. We believe 
these amendments are consistent with the findings of Congress that 
``(1) the liquid and efficient operation of the government securities 
market is essential to facilitate government borrowing at the lowest 
possible cost to taxpayers; and (2) the fair and honest treatment of 
investors will strengthen the integrity and liquidity of the government 
securities market.'' \2\ In this final rule, we provide background on 
the current LPR rules, discuss the amendments proposed in the notice of 
proposed rulemaking (NPR) issued on June 10, 2014 \3\ and public 
comments received, and then describe the amendments in the final rule. 
As explained below, we are adopting the amendments proposed in the NPR 
with nonsubstantive, technical modifications.
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    \2\ Public Law 103-202, 107 Stat. 2344 (1993) [15 U.S.C. 78o-
5(f)].
    \3\ 79 FR 33145 (June 10, 2014).
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Table of Contents

I. Current Large Position Reporting Rules
    A. Statutory Authority
    B. Rulemaking
    C. Reporting and Recordkeeping Requirements
    1. On-Demand Reporting System
    2. Who Is Subject to the Large Position Reporting Rules
    3. Notice Requesting Large Position Reports
    4. Control
    5. Components of a Position
    6. Recordkeeping
    D. Calls for Large Position Reports
II. Proposed Amendments to the Large Position Reporting Rules
III. Comments Received in Response to the Proposed Amendments
    A. Reporting Format
    B. Tri-Party Repurchase Agreement Shells
    C. Futures and Options Contracts
    D. Worked Examples
    E. Transition
IV. Section-by-Section Analysis of the Final Amendments
    A. Section 420.1--Applicability
    B. Section 420.2--Definitions
    1. Control
    2. Large Position Threshold
    3. Reporting Requirement
    4. Tri-Party Repurchase Agreements
    C. Section 420.3--Reporting
    1. Reporting Format
    2. Gross Reporting
    3. Futures and Options Contracts
    4. Components of a Position
    5. Optional Administrative Information
    D. Appendix B to Part 420--Sample Large Position Report
V. Effective Date and LPR Workshops
VI. Paperwork Reduction Act
VII. Special Analysis

I. Current Large Position Reporting Rules

A. Statutory Authority

    In response to short squeezes in two-year Treasury notes that 
occurred in the government securities market in 1990-1991,\4\ Congress 
included a large position reporting provision in the 1993 amendments to 
the GSA. This provision grants Treasury authority to prescribe rules 
requiring specified persons holding, maintaining, or controlling large 
positions in to-be-issued or recently-issued \5\ Treasury securities to

[[Page 73409]]

keep records and, when requested by Treasury, file reports of such 
large positions. The provision was intended to improve Treasury's 
collection of information on large positions in Treasury securities 
held by market participants. Such information allows Treasury to 
monitor the impact of concentrations of positions in the Treasury 
securities market. This information is also made available to the 
Federal Reserve Bank of New York (FRBNY), as Treasury's agent, and the 
SEC.\6\ Treasury does not believe that large positions in Treasury 
securities are inherently problematic and there is no presumption of 
manipulative or illegal intent merely because a reporting entity's 
position is large enough to be subject to Treasury's LPR rules.
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    \4\ Joint Report on the Government Securities Market, Department 
of the Treasury, Securities and Exchange Commission, and Board of 
Governors of the Federal Reserve System (1992). See 
www.treasurydirect.gov. Market participants use the term ``squeeze'' 
to refer to a shortage of supply relative to demand for a particular 
security, as evidenced by a movement in its price to a level that is 
out of line with prices of comparable securities--either outright 
trading quotations or in financing arrangements.
    \5\ Treasury may request information on securities that fall 
outside of these timeframes if such large position information is 
necessary and appropriate for monitoring the impact of 
concentrations of positions in Treasury securities. (See 17 CFR 
420.2(g)(5)).
    \6\ 15 U.S.C 78o-5(f)(1).
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    The GSA specifically provides that Treasury shall not be compelled 
to disclose publicly any information required to be kept or reported 
for large position reporting. In particular, the GSA exempts such 
information from disclosure under the Freedom of Information Act.\7\
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    \7\ 15 U.S.C. 78o-5(f)(6).
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B. Rulemaking

    Treasury published final rules in 1996 that established 
recordkeeping and reporting requirements related to large positions in 
certain Treasury securities.\8\ The LPR rules were subsequently amended 
in 2002 to improve the collection of information in the Reports by 
requiring more detailed reporting of certain components of the formula 
for determining a reportable position, adding a second memorandum item 
that requires the reporting of the gross par amount of ``fails to 
deliver,'' and modifying the definition of ``gross financing position'' 
to eliminate the optional exclusion in the calculation of the amount of 
securities received through financing transactions.\9\
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    \8\ 61 FR 48338 (September 12, 1996).
    \9\ 67 FR 77411 (December 18, 2002).
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C. Reporting and Recordkeeping Requirements

1. On-Demand Reporting System
    An ``on-demand'' reporting system, rather than a regular, ongoing 
system of reporting, provides Treasury with the information necessary 
to understand supply and demand dynamics in the Treasury securities 
market, while minimizing the potential impact on the market's 
efficiency and liquidity and the cost to taxpayers of funding the 
federal debt. It also minimizes the cost and burden to those reporting 
entities affected by the LPR rules.
2. Who Is Subject to the Large Position Reporting Rules
    Treasury's LPR rules apply to all foreign and domestic persons and 
entities that control a reportable position in a Treasury security, 
including: Government securities brokers and dealers; registered 
investment companies; registered investment advisers; custodians, 
including depository institutions, that exercise investment discretion; 
hedge funds; pension funds; insurance companies; and foreign affiliates 
of U.S. entities.
    The current rules provide an exemption for foreign official 
organizations.\10\ U.S. Federal Reserve Banks are also exempt for the 
portion of any reportable position they control for their own 
account.\11\
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    \10\ 17 CFR 420.1(b).
    \11\ 17 CFR 420.1(c).
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 3. Notice Requesting Large Position Reports
    Reports must be filed with FRBNY in response to a notice from 
Treasury requesting large position information on a specific issue of a 
Treasury security.\12\ The Reports must be filed by defined reporting 
entities controlling positions that equal or exceed the reporting 
threshold specified in the notice. FRBNY must receive the Reports 
before noon Eastern time on the fourth business day after the issuance 
of the notice calling for large position information.
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    \12\ The notice is in the form of a Treasury press release that 
is posted to the Treasury and TreasuryDirect Web sites, subsequently 
published in the Federal Register, and also disseminated via social 
media, major news and financial publications, and wire services. An 
electronic mailing list that distributes the notice to subscribers 
is also available at www.treasurydirect.gov.
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4. Control
    Treasury defines ``control'' as the authority to exercise 
investment discretion over the purchase, sale, retention, or financing 
of specific Treasury securities.\13\ Investment discretion can be 
exercised by the beneficial owner, a custodian, or an investment 
adviser. The party responsible for making investment decisions, 
regardless of where securities are held, is the relevant reporting 
entity for large position reporting because the actions and objectives 
of the decision maker are what we are trying to determine.
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    \13\ 17 CFR 420.2(b).
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5. Components of a Position
    Under the current rules, a reportable position is the sum of the 
net trading positions, gross financing positions and net fails 
positions in a specified issue of Treasury securities collectively 
controlled by a reporting entity.\14\ Specific components of these 
positions are identified at Sec.  420.2.\15\ Position amounts are 
required to be reported on a trade date basis at par value.
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    \14\ 17 CFR 420.2(h).
    \15\ See 17 CFR 420.2 for definitions of gross financing 
position, net fails position, and net trading position.
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6. Recordkeeping
    The recordkeeping requirements provide that any reporting entity 
controlling at least $2 billion of a particular Treasury security must 
maintain and preserve certain records that enable it to compile, 
aggregate, and report large position information.\16\
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    \16\ 17 CFR 420.4.
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D. Calls for Large Position Reports

    Treasury has conducted 14 calls since the LPR rules became 
effective in 1996.\17\ We are amending the rules based on the 
experience gained from these calls.
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    \17\ So that market participants remain knowledgeable about the 
LPR rules, specifically how to calculate and report a reportable 
position, Treasury ``tests'' the reporting system by requesting 
Reports annually, regardless of market conditions for a particular 
security. See 60 FR 65223 (December 18, 1995).
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II. Proposed Amendments to the Large Position Reporting Rules

    On June 10, 2014, Treasury issued an NPR in which we proposed 
several amendments to Treasury's LPR rules.\18\ In the NPR, Treasury 
proposed to eliminate the exemptions for foreign official organizations 
and U.S. Federal Reserve Banks (for their own account) and request that 
these organizations voluntarily submit Reports if they meet or exceed 
the reporting threshold(s). Foreign official organizations were 
exempted from the LPR rules issued in 1996 because they did not 
typically control large positions in Treasury securities and subjecting 
them to the reporting requirement would have presented legal and 
jurisdictional issues.\19\ Since that time, foreign official 
organizations have significantly increased their participation in the 
Treasury securities market. Foreign official organizations have an 
interest in this market being liquid and well-functioning. U.S. Federal 
Reserve Banks were also exempted for the portion of any reportable 
position they controlled for their own account. Treasury believes that 
the voluntary submission of Reports by foreign official organizations 
and

[[Page 73410]]

U.S. Federal Reserve Banks is consistent with the purposes of the GSA 
and will help Treasury to better understand supply and demand dynamics 
in the Treasury securities market.
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    \18\ 79 FR 33145 (June 10, 2014).
    \19\ 61 FR 48342 (September 12, 1996).
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    The NPR proposed to replace the current $2 billion minimum 
reporting threshold with a minimum threshold that is 10 percent of the 
outstanding amount of the specified Treasury security. Given the large 
range of issue sizes among various Treasury securities, making the 
minimum reporting threshold a percentage of the amount of the security 
outstanding may be a better indicator of concentrations of control. A 
percentage threshold would allow for a threshold that is less than the 
current $2 billion minimum. We would state the dollar amount of the 
reporting threshold in the notice and press release announcing a call 
for Reports. Treasury did not, however, propose amending the $2 billion 
threshold that triggers the LPR recordkeeping requirement.\20\
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    \20\ 17 CFR 420.4(a)(1).
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    Treasury also proposed to replace the concept of the reportable 
position with a reporting requirement that reporting entities must file 
a Report if any one of seven criteria is met. For certain reporting 
criteria Treasury would announce different thresholds. Applying several 
different criteria may provide greater insight into gross exposures 
large enough to potentially impact the liquidity of the security, 
regardless of how the position was acquired. However, under no 
circumstances would a large position threshold be less than 10 percent 
of the amount outstanding of the specified Treasury security.
    The NPR also introduced the term ``tri-party repurchase agreement 
shell.'' A tri-party repurchase agreement (repo) shell is an account 
created on the books of a tri-party repo agent bank following 
confirmation of a tri-party repo transaction between a cash lender and 
a collateral provider. Each shell has a unique account number and an 
eligibility rule set based on an agreement between the cash lender and 
the collateral provider.
    Treasury proposed a revised format for an entity to report its 
positions and settlement obligations in the specified Treasury 
security, including: (1) Positions at the opening of the Federal 
Reserve System's Fedwire[supreg] Securities Service (Fedwire),\21\ (2) 
settlement obligations created prior to and on the report date, and (3) 
positions at the close of Fedwire. The proposed reporting format would 
provide Treasury a better understanding of reporting entities' 
positions in the specified Treasury security leading up to the report 
date, their settlement obligations created prior to or on the report 
date, and their positions at the end of the report date.
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    \21\ The Federal Reserve System's Fedwire[supreg] Securities 
Service is a book-entry securities transfer system that provides 
safekeeping, transfer, and delivery-versus-payment settlement 
services. The Fedwire Securities Service operates daily from 8:30 
a.m. to 3:30 p.m. Eastern Time.
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    For transactions between different entities, Treasury proposed a 
two-column format for positions to be reported on a gross basis in 
order to separate settlement ``obligations to receive'' and 
``obligations to deliver.'' This format would potentially make it 
easier for Treasury to understand a reporting entity's trading 
activity, including what positions it might control in the future. This 
approach may also be easier for many reporting entities to understand 
because it may align more closely with the way they typically maintain 
their records.
    In the NPR, Treasury proposed to expand the components of a 
position to also include futures, options on futures, and options 
contracts for which the specified Treasury security is deliverable. The 
components would include contracts that require delivery of the 
specified Treasury security as well as contracts that allow for the 
delivery of several securities.
    Treasury also proposed to replace the current components of a total 
reportable position with the following report components:
    a. Positions in the Security Being Reported at the Opening of 
Fedwire on the Report Date, including positions:
    i. In accounts of the reporting entity;
    ii. In tri-party repurchase agreement shells;
    iii. As collateral or margin against financial derivatives and 
other contractual obligations of the reporting entity; and
    iv. Controlled by any other means.
    b. Settlement Obligations Attributable to Purchase and Sale 
Contracts Negotiated Prior to and on the Report Date (excluding 
settlement fails), including:
    i. Obligations to receive or deliver, on the report date, the 
security being reported attributable to contracts for cash settlement 
(T+0);
    ii. Obligations to receive or deliver, on the report date, the 
security being reported attributable to contracts for regular 
settlement (T+1);
    iii. Obligations to receive or deliver, on the report date, the 
security being reported attributable to forward contracts, including 
when-issued contracts, for forward settlement (T+n, n>1);
    iv. Obligations to receive, on the report date, the security being 
reported attributable to Treasury auction awards; and
    v. Obligations to receive or deliver, on the report date, principal 
STRIPS \22\ derived from the security being reported attributable to 
contracts for cash settlement, regular settlement, when-issued 
contracts, and forward contracts.
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    \22\ STRIPS (Separate Trading of Registered Interest and 
Principal of Securities) means Treasury's program under which 
eligible securities are authorized to be separated into principal 
and interest components, and transferred separately. See 31 CFR 
356.2.
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    c. Settlement Obligations Attributable to Delivery-versus-Payment 
Financing Contracts (including repurchase agreements and securities 
lending agreements) Negotiated Prior to and on the Report Date 
(excluding settlement fails), including:
    i. Obligations to receive or deliver, on the report date, the 
security being reported, and principal STRIPS derived from the security 
being reported, attributable to overnight agreements;
    ii. Obligations to receive or deliver, on the report date, the 
security being reported, and principal STRIPS derived from the security 
being reported, attributable to term agreements opened on, or due to 
close on, the report date;
    iii. Obligations to receive or deliver, on the report date, the 
security being reported, and principal STRIPS derived from the security 
being reported, attributable to open agreements opened on, or due to 
close on, the report date.
    d. Settlement Fails from Days Prior to the Report Date (Legacy 
Obligations), including:
    i. Obligations to receive or deliver, on the report date, the 
security being reported, and principal STRIPS derived from the security 
being reported, arising out of settlement fails on days prior to the 
report date.
    e. Settlement Fails as of the Close of Fedwire on the Report Date, 
including:
    i. Obligations to receive or deliver, on the business day following 
the report date, the security being reported, and principal STRIPS 
derived from the security being reported, arising out of settlement 
fails on the report date.
    f. Positions in the Security Being Reported at the Close of Fedwire 
on the Report Date, including positions:
    i. In accounts of the reporting entity;
    ii. In tri-party repurchase agreement shells;
    iii. As collateral or margin against financial derivatives and 
other contractual obligations of the reporting entity; and
    iv. Controlled by any other means.
    g. Quantity of Continuing Delivery-versus-Payment Financing 
Contracts for

[[Page 73411]]

the Security Being Reported, including the:
    i. Net amount of security being reported lent out on term 
repurchase agreements that were opened before the report date and that 
were not due to close until after the report date, and on open 
repurchase agreements that were opened before the report date and that 
were not closed on the report date.
    h. Futures and Options Contracts, including the:
    i. Net long position, immediately prior to the opening of futures 
and options trading on the report date, in futures, options on futures, 
and options contracts on which the security being reported is 
deliverable; and
    ii. Net long position, immediately following the close of futures 
and options trading on the report date, in futures, options on futures, 
and options contracts on which the security being reported is 
deliverable.
    All amounts would be reported as positive numbers and at par in 
millions of dollars.
    In the NPR, Treasury proposed an option for reporting entities to 
identify the type(s) of business engaged in by the reporting entity and 
its aggregating entities with respect to positions in the specified 
Treasury security by checking the appropriate box. Treasury also 
proposed an option for reporting entities to identify their overall 
investment strategy with respect to positions in the specified Treasury 
security by checking the appropriate box. Knowing the type(s) of 
business in which the reporting entity is engaged and its overall 
investment strategy with respect to the specified Treasury security 
would help us better understand the positions included in the entity's 
Report.
    The current LPR rules specify the positions that entities are 
required to report, however, additional guidance on the treatment of 
specific transactions is contained in the preambles to the previous 
proposed and final rules, and a list of Frequently Asked Questions 
available on the TreasuryDirect Web site. The NPR proposed to 
consolidate certain guidance in the rules themselves, which may help to 
simplify the reporting process and make the reporting requirements 
clearer.

III. Comments Received in Response to the Proposed Amendments

    In response to the proposed rule, Treasury received comment letters 
from a private citizen and a financial services industry trade 
association (``trade association'' or ``commenter'').\23\ The private 
citizen's comments were not responsive to the request for comments on 
the proposed LPR amendments. While broadly supporting Treasury's goals 
and generally supportive of the proposed amendments in the NPR, the 
trade association raised several questions and technical comments.
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    \23\ Comment letter of Matthew Lykken (June 7, 2014), and 
comment letter of the Securities Industry and Financial Markets 
Association (August 8, 2014), are available at http://www.treasurydirect.gov/instit/statreg/gsareg/gsareg.htm.
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A. Reporting Format

    The trade association expressed concern that using a revised format 
that would require reporting entities to report certain information as 
of the opening and closing of Fedwire would not reflect actual, formal 
openings and closings of the Treasury and funding markets. The 
commenter also asserted that it would create significant operational 
burdens and possibly require manual processing that could undermine the 
overall quality of the information Treasury ultimately receives. 
Further, the trade association commented that, for many firms, the 
proposed reporting times reflect intraday positions. The commenter 
noted that, ``member firms could not reconcile intraday positions to 
verify the accuracy of non-end-of-day positions.'' The commenter 
suggested that, ``Treasury consider retaining its current close of 
business requirement for certain positions on the report date.''

B. Tri-Party Repurchase Agreement Shells

    The trade association requested further guidance as to what 
positions are reportable under Part I, Line 2 ``held in tri-party 
repurchase agreement shells.''

C. Futures and Options Contracts

    The trade association questioned the expansion of the LPR rules to 
include certain futures and options that allow for the delivery of 
several securities. Currently, the rules only require the reporting of 
positions in futures contracts that require the delivery of the 
specified Treasury security. The commenter asserted that Treasury's 
views stated in the 1995 proposed LPR rules \24\ ``are still 
appropriate today (and arguably even more so given the Chicago Board of 
Trade's adoption of position limits on Treasury futures in 2005).''
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    \24\ 60 FR 65219 (December 18, 1995).
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    The commenter noted that Treasury's 1995 proposed LPR rules stated 
the following:
     Options and certain futures contracts are excluded because 
they do not provide the holder with either immediate control or an 
effective way to manipulate the price of a specific security.
     For options, an entity would only gain control of the 
security at the time the position is exercised, at which time the 
security would become a component of a reportable position.
     Large positions in futures contracts are already reported 
to the Commodity Futures Trading Commission. Thus, this information 
will be available to Treasury, if needed, without imposing additional 
reporting requirements.
    The commenter noted that, ``the data collected could overstate 
current issue positions and not provide the Treasury with an accurate 
picture of the potential demand and supply characteristics of a 
particular security. This could potentially compromise the overall 
value and general usefulness of this information to the Treasury.'' If 
Treasury proceeds with the expanded reporting requirement, the trade 
association suggested that Treasury should:
     Incorporate an adjustment to the required reporting amount 
to reflect the probability that the particular security will be 
delivered (e.g., a delta adjustment for options) to ensure that the 
information reflects accurately the demand and supply for that 
particular security.
     Clarify whether over-the-counter (OTC) options are to be 
considered within the scope of this expanded collection. Treasury 
should also provide additional guidance as to the use of published 
lists of cheapest-to-deliver securities provided by the futures 
exchanges or a vendor to determine which CUSIPs are deliverable for 
futures and options and the degree to which firms could limit the 
reportable positions to those CUSIPs that are within the top three 
cheapest-to-deliver.

D. Worked Examples

    The trade association suggested it would be helpful to market 
participants to see the expected treatment of a hypothetical position 
that would include the new data elements.

E. Transition

    The trade association requested that the final rule include an 
appropriate transition period before making the changes effective to 
allow firms sufficient time to implement the necessary tracking and 
reporting changes.

IV. Section-by-Section Analysis of the Final Amendments

    Treasury has endeavored to strike a balance between achieving the 
purposes

[[Page 73412]]

and objectives of the GSA's LPR requirements and minimizing costs and 
burdens on reporting entities. We believe that these amendments 
continue to achieve this balance by improving the type of information 
collected through the Reports while simplifying the reporting process 
for many reporting entities.
    Treasury has carefully considered the comments we received. We have 
also consulted staff of the Securities and Exchange Commission, the 
Board of Governors of the Federal Reserve System, and the Federal 
Reserve Bank of New York in developing the final LPR rule amendments. 
We are adopting the amendments proposed in the NPR with nonsubstantive, 
technical modifications, including a clarification recommended by the 
commenter.

A. Section 420.1--Applicability

    In the NPR, Treasury proposed to eliminate the exemptions for 
foreign central banks, foreign governments, and international monetary 
authorities and request that these entities as well as U.S. Federal 
Reserve Banks for their own account voluntarily submit Reports if they 
meet or exceed the reporting threshold(s). We did not receive any 
comments on this proposed amendment and, therefore, we are adopting it 
as proposed.

B. Section 420.2--Definitions

1. Control
    To avoid potential confusion regarding multiple entities reporting 
the same position in the specified Treasury security, we are modifying 
the definition of ``control'' by deleting the sentence that states only 
one entity should be considered to have investment discretion over a 
particular position. There may be situations, such as financing 
transactions, where more than one entity may include the same position 
in their calculation.
2. Large Position Threshold
    Treasury proposed to replace the current $2 billion minimum 
reporting threshold with a minimum threshold that is 10 percent of the 
outstanding amount of the specified Treasury security. We did not 
receive any comments on this proposed amendment and, therefore, we are 
adopting it as proposed.
    We are also adding a sentence to the definition of large position 
threshold stating that the term also means the minimum number of 
futures, options on futures, and exchange-traded options contracts that 
a reporting entity controls for which the specified Treasury security 
is deliverable. This technical modification was made to provide for the 
reporting of the number of these contracts.
3. Reporting Requirement
    Treasury proposed in the NPR to replace the concept of the 
reportable position with a reporting requirement that reporting 
entities file a Report if any one of seven criteria set out in the 
Report is met. Because Treasury is requiring that futures, options on 
futures, and exchange-traded options be reported separately from OTC 
options, criterion G has been split and an eighth criterion H was 
added. Under G, reporting entities will be required to submit a Report 
if the number of futures, options on futures, and exchange-traded 
options contracts controlled by the reporting entity is equal to or 
greater than the announced large position threshold. To provide more 
clarity on the reporting of options positions, criterion H will require 
that reporting entities submit a Report if their net position in OTC 
options contracts on which the security being reported is deliverable 
is equal to or greater than the announced large position threshold. 
Entities would report the notional amounts of contracts regardless of 
the option delta.
4. Tri-Party Repurchase Agreements
    The proposed amendments also introduced the term ``tri-party 
repurchase agreement shell.'' In its comment letter the trade 
association indicated that the term ``tri-party repurchase agreement 
shell'' may not be clear to reporting entities and requested further 
guidance as to what positions are reportable under this item. Treasury 
is adopting the amendment with modifications to address the issue 
raised by the commenter. Treasury is replacing the term ``tri-party 
repurchase agreement shell'' with ``tri-party repurchase agreements,'' 
a more familiar and well understood term in the Treasury securities 
market.

C. Section 420.3--Reporting

1. Reporting Format
    In the NPR, Treasury proposed a revised format for an entity to 
report its positions and settlement obligations in the specified 
Treasury security at the opening and closing of Fedwire. The trade 
association acknowledged the informational benefits of comparing 
positions at two points in time and that Treasury would receive 
important information on a firm's behavior and activity in the market 
over the course of a trading day. In its comment letter, however, the 
trade association stated its belief that the opening and closing of 
Fedwire as reporting times do not reflect actual, formal openings and 
closings of the Treasury and funding markets and would create 
significant operational burdens that could undermine the overall 
quality of the information Treasury ultimately receives. The commenter 
advocated reporting these positions as of the close of business on the 
report date and at the close of business on the day prior to the report 
date. The commenter asserted that these timeframes would be consistent 
with current practice and better reflect a firm's position. As 
recommended by the commenter, we are replacing references in the NPR to 
the opening and closing of Fedwire with reporting as of the opening and 
close of business. We are also making technical modifications to Sec.  
420.3 and appendix B to clarify the components to be included in the 
Report.
2. Gross Reporting
    For transactions between different defined reporting entities, 
Treasury proposed a two-column format for positions to be reported on a 
gross basis in order to separate settlement ``obligations to receive'' 
and ``obligations to deliver.'' Aggregating entities that are part of 
the same reporting entity may net receive and deliver obligations 
resulting from intercompany transactions. We did not receive any 
comments on this proposed amendment and, therefore, we are adopting it 
as proposed. We are also modifying Part VII of the Report to require 
the reporting of the gross quantity of securities borrowed and the 
gross quantity of securities lent for delivery-versus-payment financing 
contracts. The modification was made to parallel the approach taken in 
other sections for reporting on a ``gross'' basis instead of ``net'' 
basis.
3. Futures and Options Contracts
    Treasury proposed to expand the components of a position to also 
include futures, options on futures, and options contracts for which 
the specified Treasury security is deliverable. The trade association 
questioned this proposal citing Treasury's rationale for excluding 
certain futures and options from the components of a reportable 
position in its 1996 final rule. While we continue to believe, as we 
did in 1996, that options and certain futures contracts do not provide 
the holder with either immediate control or an effective way to 
manipulate the price of a specific security, the proposed amendment was 
designed to provide Treasury with

[[Page 73413]]

potentially important insight into a reporting entity's strategy 
regarding the underlying security.
    The commenter requested that, if Treasury proceeds with the 
expanded reporting requirement for futures and options, Treasury 
provide an adjustment or additional guidance to reporting entities to 
limit reportable positions to those Treasury securities that are the 
most likely to be delivered against a futures or options contract. We 
believe that such adjustments will complicate the position calculation 
process and therefore we are including all futures, options on futures, 
and options contracts (both exchange-traded and OTC) for which the 
specified Treasury security is deliverable. In addition, we are 
modifying Part VIII to require the reporting of net positions in these 
contracts (both net long and net short positions) to parallel the 
approach taken in other sections of the Report.
    The trade association also requested that Treasury clarify whether 
OTC options will be within the scope of futures and options contracts 
that must be included in the large position reporting calculation. 
Treasury is making this clarification and including OTC options within 
the scope of the reporting requirement.
4. Components of a Position
    With the exception of futures and options contracts and tri-party 
repurchase agreement shells, Treasury did not receive comments on any 
other components of a position. However, to provide more clarity on the 
reporting of repurchase agreement positions, we are adding a separate 
component for the reporting of collateral against borrowings of funds 
on general collateral finance repurchase agreements, including the 
Depository Trust & Clearing Corporation's GCF Repo[supreg] service.\25\
---------------------------------------------------------------------------

    \25\ The Depository Trust & Clearing Corporation's GCF 
Repo[supreg] service enables dealers to trade general collateral 
repos, based on rate, term, and underlying product, throughout the 
day without requiring intra-day, trade-for-trade settlement on a 
delivery-versus-payment basis.
---------------------------------------------------------------------------

5. Optional Administrative Information
    In the NPR, Treasury proposed an option for reporting entities to 
identify the type(s) of business engaged in by the reporting entity and 
its aggregating entities with respect to positions in the specified 
Treasury security by checking the appropriate box. Treasury also 
proposed an option for reporting entities to identify their overall 
investment strategy with respect to positions in the specified Treasury 
security by checking the appropriate box. We did not receive any 
comments on these administrative information options and, therefore, we 
are adopting them as proposed.

D. Appendix B to Part 420--Sample Large Position Report

    The sample large position report in appendix B has been amended to 
conform to the changes in Sec.  420.3(c) of the final reporting rules.

V. Effective Date and LPR Workshops

    The trade association requested that the final rule include an 
appropriate transition period. Treasury is providing a 90-day delayed 
effective date from the date of publication in the Federal Register to 
allow reporting entities sufficient time to make necessary preparations 
for compliance. The trade association also suggested that examples of 
expected treatment of a hypothetical position would be helpful. 
Subsequent to the rules taking effect, Treasury will also conduct LPR 
workshops at FRBNY for market participants that may potentially control 
large positions in a particular Treasury security.

VI. Paperwork Reduction Act

    The collections of information contained in the final amendments 
have been reviewed and approved by the Office of Management and Budget 
(OMB) pursuant to the Paperwork Reduction Act of 1995 (Act).\26\ Under 
the Act, an agency may not conduct or sponsor, and a person is not 
required to respond to, a collection of information unless it displays 
a valid OMB control number.\27\
---------------------------------------------------------------------------

    \26\ 44 U.S.C. 3507(d).
    \27\ The collections of information contained in the final 
amendments have been approved by the Office of Management and Budget 
under control number 1535-0089.
---------------------------------------------------------------------------

    The collection of information in these amendments is contained in 
Sec.  420.3. The amendments require a reporting entity that meets any 
one of eight criteria to submit a Report to FRBNY. Although we cannot 
be certain of the number of entities that would be required to report 
their positions as a result of a call for such Reports, we believe few 
reporting entities would actually have to file Reports because the 
minimum reporting threshold remains high. In fact, the actual reporting 
threshold(s) in a specific call for large position reports may exceed 
the minimum reporting threshold. Moreover, we expect that our requests 
for information will continue to be infrequent.
    Treasury does not believe that reporting entities will find 
reporting the additional position information overly burdensome because 
this approach may align more closely with the way many reporting 
entities typically maintain their records. In addition, reporting 
entities must collect much of this information to calculate their 
reportable position under the current LPR rules. Because the amendments 
require more detailed information to be provided by entities that file 
reports, we increased the annual reporting burden in our submission to 
OMB by 104 hours, representing an increase from eight hours to ten 
hours per reporting entity and an increase from 12 to 20 reporting 
entities.
    The collection of information is intended to enable Treasury and 
other regulators to better understand supply and demand dynamics in 
certain Treasury securities. Such information allows Treasury to 
monitor the impact of concentrations of positions in the Treasury 
securities market. This information will help the Treasury securities 
market remain liquid and efficient and facilitate government borrowing 
at the lowest possible cost to taxpayers.
    Estimated total annual reporting burden: 200 hours.
    Estimated annual number of respondents: 20.
    Estimated annual frequency of response: 1.
    Comments on the accuracy of the estimate for this collection of 
information or suggestions to reduce the burden should be sent to the 
Office of Information and Regulatory Affairs, Office of Management and 
Budget, Attention: Desk Officer for Department of the Treasury, 
Washington, DC, 20503; and to the Government Securities Regulations 
Staff, Department of the Treasury, Bureau of the Fiscal Service, 401 
14th Street SW., Washington, DC 20227.

VII. Special Analysis

    Executive Orders 13563 and 12866 direct agencies to assess costs 
and benefits of available regulatory alternatives and, if regulation is 
necessary, to select regulatory approaches that maximize net benefits 
(including potential economic, environmental, public health and safety 
effects, distributive impacts, and equity). Executive Order 13563 
emphasizes the importance of quantifying both costs and benefits, of 
reducing costs, of harmonizing rules, and of promoting flexibility.
    These amendments reflect Treasury's continuing interest in meeting 
its informational needs while minimizing the cost and burden on those 
entities affected by the regulations. The amendments retain the on-
demand

[[Page 73414]]

reporting system, adopted in 1996, which is less burdensome than a 
regular reporting system. Based on the limited impact of these 
amendments, it is our view that this final rule is not a ``significant 
regulatory action'' for the purposes of Executive Order 12866.
    In addition, we certify under the Regulatory Flexibility Act (5 
U.S.C. 601, et seq.) that the amendments to the current regulations 
will not have a significant economic impact on a substantial number of 
small entities. We believe that small entities will not control 
positions of 10 percent or greater of the amount outstanding in any 
particular Treasury security. The inapplicability of the amendments to 
small entities indicates there is no significant impact. As a result, a 
regulatory flexibility analysis is not required.
    Even though this rule qualifies as a procedural rule for purposes 
of 5 U.S.C. 553(b)(A), we published a proposed rule for public comment.

List of Subjects in 17 CFR Part 420

    Banks, banking, Brokers, Government securities, Reporting and 
recordkeeping requirements.

    For the reasons stated in the preamble, 17 CFR part 420 is revised 
to read as follows:

PART 420--LARGE POSITION REPORTING

Sec.
420.1 Applicability.
420.2 Definitions.
420.3 Reporting.
420.4 Recordkeeping.
420.5 Applicability date.
Appendix A to Part 420--Separate Reporting Entity
Appendix B to Part 420--Sample Large Position Report

    Authority: 15 U.S.C. 78o-5(f).


Sec.  420.1  Applicability.

    (a) This part is applicable to all persons that participate in the 
government securities market, including, but not limited to: Government 
securities brokers and dealers, depository institutions that exercise 
investment discretion, registered investment companies, registered 
investment advisers, pension funds, hedge funds, and insurance 
companies that may control a position in a recently-issued marketable 
Treasury bill, note, or bond as those terms are defined in Sec.  420.2.
    (b) Notwithstanding paragraph (a) of this section, Treasury 
requests that central banks (including U.S. Federal Reserve Banks for 
their own account), foreign governments, and international monetary 
authorities voluntarily submit large position reports when they meet or 
exceed a reporting threshold.


Sec.  420.2  Definitions.

    For the purposes of this part:
    Aggregating entity means a single entity (e.g., a parent company, 
affiliate, or organizational component) that is combined with other 
entities, as specified in the definition of ``reporting entity'' of 
this section, to form a reporting entity. In those cases where an 
entity has no affiliates, the aggregating entity is the same as the 
reporting entity.
    Control means having the authority to exercise investment 
discretion over the purchase, sale, retention, or financing of specific 
Treasury securities.
    Large position threshold means the minimum dollar par amount of the 
specified Treasury security that a reporting entity must control in 
order for the entity to be required to submit a large position report. 
It also means the minimum number of futures, options on futures, and 
exchange-traded options contracts for which the specified Treasury 
security is deliverable that the reporting entity must control in order 
for the entity to be required to submit a large position report. 
Treasury will announce the large position thresholds, which may vary 
with each notice of request to report large position information and 
with each specified Treasury security. Treasury may announce different 
thresholds for certain reporting criteria. Under no circumstances will 
a large position threshold be less than 10 percent of the amount 
outstanding of the specified Treasury security.
    Recently-issued means:
    (1) With respect to Treasury securities that are issued quarterly 
or more frequently, the three most recent issues of the security.
    (2) With respect to Treasury securities that are issued less 
frequently than quarterly, the two most recent issues of the security.
    (3) With respect to a reopened security, the entire issue of a 
reopened security (older and newer portions) based on the date the new 
portion of the reopened security is issued by Treasury (or for when-
issued securities, the scheduled issue date).
    (4) For all Treasury securities, a security announced to be issued 
or auctioned but unissued (when-issued), starting from the date of the 
issuance announcement. The most recent issue of the security is the one 
most recently announced.
    (5) Treasury security issues other than those specified in 
paragraphs (1) and (2) of this definition, provided that such large 
position information is necessary and appropriate for monitoring the 
impact of concentrations of positions in Treasury securities.
    Reporting entity means any corporation, partnership, person, or 
other entity and its affiliates, as further provided herein. For the 
purposes of this definition, an affiliate is any: Entity that is more 
than 50% owned, directly or indirectly, by the aggregating entity or by 
any other affiliate of the aggregating entity; person or entity that 
owns, directly or indirectly, more than 50% of the aggregating entity; 
person or entity that owns, directly or indirectly, more than 50% of 
any other affiliate of the aggregating entity; or entity, a majority of 
whose board of directors or a majority of whose general partners are 
directors or officers of the aggregating entity or any affiliate of the 
aggregating entity.
    (1) Subject to the conditions prescribed in appendix A to this 
part, one aggregating entity, or a combination of aggregating entities, 
may be recognized as a separate reporting entity.
    (2) Notwithstanding this definition, any persons or entities that 
intentionally act together with respect to the investing in, retention 
of, or financing of Treasury securities are considered, collectively, 
to be one reporting entity.
    Reporting requirement means that an entity must file a large 
position report when it meets any one of eight criteria contained in 
appendix B to this part.


Sec.  420.3  Reporting.

    (a) A reporting entity must file a large position report if it 
meets the reporting requirement as defined in Sec.  420.2. Treasury 
will provide notice of the large position thresholds by issuing a press 
release and subsequently publishing the notice in the Federal Register. 
Such notice will identify the Treasury security issue(s) to be reported 
(including, where applicable, identifying the related STRIPS principal 
component); the date or dates for which the large position information 
must be reported; and the large position thresholds for that issue. A 
reporting entity is responsible for taking reasonable actions to be 
aware of such a notice.
    (b) A reporting entity shall select one entity from among its 
aggregating entities (i.e., the designated filing entity) as the entity 
designated to compile and file a report on behalf of the reporting 
entity. The designated filing entity shall be responsible for filing 
any large position reports in response to a notice issued by Treasury 
and for maintaining

[[Page 73415]]

the additional records prescribed in Sec.  420.4.
    (c)(1) In response to a notice issued under paragraph (a) of this 
section requesting large position information, a reporting entity that 
controls an amount of the specified Treasury security that equals or 
exceeds one of the specified large position thresholds stated in the 
notice shall compile and report the amounts of the reporting entity's 
positions in the order specified, as follows:
    (i) Part I. Positions in the Security Being Reported as of the 
Opening of Business on the Report Date, including positions:
    (A) In book-entry accounts of the reporting entity;
    (B) As collateral against borrowings of funds on general collateral 
finance repurchase agreements;
    (C) As collateral against borrowings of funds on tri-party 
repurchase agreements;
    (D) As collateral or margin to secure other contractual obligations 
of the reporting entity; and
    (E) Otherwise available to the reporting entity.
    (ii) Part II. Settlement Obligations Attributable to Outright 
Purchase and Sale Contracts Negotiated Prior to or on the Report Date 
(excluding settlement fails), including:
    (A) Obligations to receive or deliver, on the report date, the 
security being reported attributable to contracts for cash settlement 
(T+0);
    (B) Obligations to receive or deliver, on the report date, the 
security being reported attributable to contracts for regular 
settlement (T+1);
    (C) Obligations to receive or deliver, on the report date, the 
security being reported attributable to contracts, including when-
issued contracts, for forward settlement (T+n, n>1);
    (D) Obligations to receive, on the report date, the security being 
reported attributable to Treasury auction awards; and
    (E) Obligations to receive or deliver, on the report date, 
principal STRIPS derived from the security being reported attributable 
to contracts for cash settlement, regular settlement, when-issued 
settlement, and forward settlement.
    (iii) Part III. Settlement Obligations Attributable to Delivery-
versus-Payment Financing Contracts (including repurchase agreements and 
securities lending agreements) Negotiated Prior to or on the Report 
Date (excluding settlement fails), including:
    (A) Obligations to receive or deliver, on the report date, the 
security being reported, and principal STRIPS derived from the security 
being reported, attributable to overnight agreements;
    (B) Obligations to receive or deliver, on the report date, the 
security being reported, and principal STRIPS derived from the security 
being reported, attributable to term agreements due to open on, or due 
to close on, the report date; and
    (C) Obligations to receive or deliver, on the report date, the 
security being reported, and principal STRIPS derived from the security 
being reported, attributable to open agreements due to open on, or due 
to close on, the report date.
    (iv) Part IV. Settlement Fails from Days Prior to the Report Date 
(Legacy Obligations), including obligations to receive or deliver, on 
the report date, the security being reported, and principal STRIPS 
derived from the security being reported, arising out of settlement 
fails on days prior to the report date.
    (v) Part V. Settlement Fails as of the Close of Business on the 
Report Date, including obligations to receive or deliver, on the 
business day following the report date, the security being reported, 
and principal STRIPS derived from the security being reported, arising 
out of settlement fails on the report date.
    (vi) Part VI. Positions in the Security Being Reported as of the 
Close of Business on the Report Date, including positions:
    (A) In book-entry accounts of the reporting entity;
    (B) As collateral against borrowings of funds on general collateral 
finance repurchase agreements;
    (C) As collateral against borrowings of funds on tri-party 
repurchase agreements;
    (D) As collateral or margin to secure other contractual obligations 
of the reporting entity; and
    (E) Otherwise available to the reporting entity.
    (vii) Part VII. Quantity of Continuing Delivery-versus-Payment 
Financing Contracts for the Security Being Reported, including the 
gross amount of security being reported borrowed or lent out on term 
delivery-versus-payment repurchase agreements opened before the report 
date and not due to close until after the report date, and on open 
delivery-versus-payment repurchase agreements opened before the report 
date and not closed on the report date.
    (viii) Part VIII. Futures and Options Contracts, including:
    (A)(1) Net position, as of the close of market on the business day 
prior to the report date, in futures, options on futures, and exchange-
traded options contracts on which the security being reported is 
deliverable (report number of contracts); and
    (2) Net position, as of the close of market on the report date, in 
futures, options on futures, and exchange-traded options contracts on 
which the security being reported is deliverable (report number of 
contracts).
    (B)(1) Net position, as of the close of market on the business day 
prior to the report date, in over-the-counter options contracts on 
which the security being reported is deliverable (report notional 
amount of contracts regardless of option delta); and
    (2) Net position, as of the close of market on the report date, in 
over-the-counter options contracts on which the security being reported 
is deliverable (report notional amount of contracts regardless of 
option delta).
    (d) An illustration of a sample report is contained in appendix B 
of this part.
    (e) Each of the components of Part I-Part VIII of paragraph (c)(1) 
of this section shall be reported as a positive number or zero. All 
reportable amounts should be reported in the order specified above and 
at par in millions of dollars, except futures, options on futures, and 
exchange-traded options contracts, which should be reported as the 
number of contracts. Over-the-counter options contracts should be 
reported as the notional dollar amount of contracts regardless of 
option delta.
    (f) Each submitted large position report must include the following 
administrative information: Name of the reporting entity; address of 
the principal place of business; name and address of the designated 
filing entity; the Treasury security that is being reported; the CUSIP 
number for the security being reported; the report date or dates for 
which information is being reported; the date the report was submitted; 
name and telephone number of the person to contact regarding 
information reported; and name and position of the authorized 
individual submitting this report.
    (1) Reporting entities have the option to identify the type(s) of 
business engaged in by the reporting entity and its aggregating 
entities with positions in the specified Treasury security by checking 
the appropriate box. The types of businesses include: Broker or dealer, 
government securities broker or dealer, municipal securities broker or 
dealer, futures commission merchant, bank holding company, non-bank 
holding company, bank, investment adviser, commodity pool operator, 
pension trustee, non-pension trustee, and insurance company. Reporting 
entities may select as many business types as applicable. If the 
reporting entity is engaged in a business that is not listed,

[[Page 73416]]

it could select ``other'' and provide a description of its business 
with respect to positions in the specified Treasury security.
    (2) Reporting entities also have the option to identify their 
overall investment strategy with respect to positions in the specified 
Treasury security by checking the appropriate box. Active investment 
strategies include those that involve purchasing, selling, borrowing, 
lending, and financing positions in the security prior to maturity. 
Passive investment strategies include those that involve holding the 
security until maturity. A combination of active and passive strategies 
would involve applying the aforementioned active and passive strategies 
to all or a portion of a reporting entity's positions in the specified 
Treasury security. Reporting entities may select the most applicable 
investment strategy.
    (g) The large position report must be signed by one of the 
following: The chief compliance officer; chief legal officer; chief 
financial officer; chief operating officer; chief executive officer; or 
managing partner or equivalent of the designated filing entity. The 
designated filing entity must also include in the report, immediately 
preceding the signature, a statement of certification as follows:

    By signing below, I certify that the information contained in 
this report with regard to the designated filing entity is accurate 
and complete. Further, after reasonable inquiry and to the best of 
my knowledge and belief, I certify that: (i) The information 
contained in this report with regard to any other aggregating 
entities is accurate and complete; and (ii) the reporting entity, 
including all aggregating entities, is in compliance with the 
requirements of 17 CFR part 420.

    (h) The report must be filed before noon Eastern Time on the fourth 
business day following issuance of the press release.
    (i) A report to be filed pursuant to paragraph (c) of this section 
will be considered filed when received by the Federal Reserve Bank of 
New York. The report may be filed by facsimile or delivered hard copy. 
The Federal Reserve Bank of New York may in its discretion also 
authorize other means of reporting.
    (j) A reporting entity that has filed a report pursuant to 
paragraph (c) of this section shall, at the request of Treasury or the 
Federal Reserve Bank of New York, timely provide any supplemental 
information pertaining to such report.


(Approved by the Office of Management and Budget under control number 
1535-0089)


Sec.  420.4  Recordkeeping.

    (a) Recordkeeping responsibility of aggregating entities. 
Notwithstanding the provisions of paragraphs (b) and (c) of this 
section, an aggregating entity that controls a portion of its reporting 
entity's position in a recently-issued Treasury security, when such 
position of the reporting entity equals or exceeds $2 billion, shall be 
responsible for making and maintaining the records prescribed in this 
section.
    (b) Records to be made and preserved by entities that are subject 
to the recordkeeping provisions of the SEC, Treasury, or the 
appropriate regulatory agencies for financial institutions. As an 
aggregating entity, compliance by a registered broker or dealer, 
registered government securities broker or dealer, noticed financial 
institution, depository institution that exercises investment 
discretion, registered investment adviser, or registered investment 
company with the applicable recordkeeping provisions of the SEC, 
Treasury, or the appropriate regulatory agencies for financial 
institutions shall constitute compliance with this section, provided 
that, if such entity is also the designated filing entity, it:
    (1) Makes and keeps copies of all large position reports filed 
pursuant to this part;
    (2) Makes and keeps supporting documents or schedules used to 
compute data for the large position reports filed pursuant to this 
part, including any certifications or schedules it receives from 
aggregating entities pertaining to their holdings of the reporting 
entity's position;
    (3) Makes and keeps a chart showing the organizational entities 
that are aggregated (if applicable) in determining the reporting 
entity's position; and
    (4) With respect to recordkeeping preservation requirements that 
contain more than one retention period, preserves records required by 
paragraphs (b)(1) through (3) of this section for the longest record 
retention period of applicable recordkeeping provisions.
    (c) Records to be made and preserved by other entities. (1) An 
aggregating entity that is not subject to the provisions of paragraph 
(b) of this section shall make and preserve a journal, blotter, or 
other record of original entry containing an itemized record of all 
transactions that contribute to a reporting entity's position, 
including information showing the account for which such transactions 
were effected and the following information pertaining to the 
identification of each instrument: The type of security, the par 
amount, the CUSIP number, the trade date, the maturity date, the type 
of transaction (e.g., a reverse repurchase agreement), and the name or 
other designation of the person from whom sold or purchased.
    (2) If such aggregating entity is also the designated filing 
entity, then in addition it shall make and preserve the following 
records:
    (i) Copies of all large position reports filed pursuant to this 
part;
    (ii) Supporting documents or schedules used to compute data for the 
large position reports filed pursuant to this part, including any 
certifications or schedules it receives from aggregating entities 
pertaining to their holdings of the reporting entity's position; and
    (iii) A chart showing the organizational entities that are 
aggregated (if applicable) in determining the reporting entity's 
position.
    (3) With respect to the records required by paragraphs (c)(1) and 
(2) of this section, each such aggregating entity shall preserve such 
records for a period of not less than six years, the first two years in 
an easily accessible place. If an aggregating entity maintains its 
records at a location other than its principal place of business, the 
aggregating entity must maintain an index that states the location of 
the records, and such index must be easily accessible at all times.


(Approved by the Office of Management and Budget under control number 
1535-0089)


Sec.  420.5  Applicability date.

    The provisions of this part shall be first applicable beginning 
March 31, 1997.

Appendix A to Part 420--Separate Reporting Entity

    Subject to the following conditions, one or more aggregating 
entity(ies) (e.g., parent, subsidiary, or organizational component) 
in a reporting entity, either separately or together with one or 
more other aggregating entity(ies), may be recognized as a separate 
reporting entity. All of the following conditions must be met for 
such entity(ies) to qualify for recognition as a separate reporting 
entity:
    (1) Such entity(ies) must be prohibited by law or regulation 
from exchanging, or must have established written internal 
procedures designed to prevent the exchange of information related 
to transactions in Treasury securities with any other aggregating 
entity;
    (2) Such entity(ies) must not be created for the purpose of 
circumventing these large position reporting rules;
    (3) Decisions related to the purchase, sale or retention of 
Treasury securities must be made by employees of such entity(ies). 
Employees of such entity(ies) who make decisions to purchase or 
dispose of Treasury

[[Page 73417]]

securities must not perform the same function for other aggregating 
entities; and
    (4) The records of such entity(ies) related to the ownership, 
financing, purchase and sale of Treasury securities must be 
maintained by such entity(ies). Those records must be identifiable--
separate and apart from similar records for other aggregating 
entities.
    To obtain recognition as a separate reporting entity, each 
aggregating entity or group of aggregating entities must request 
such recognition from Treasury pursuant to the procedures outlined 
in Sec.  400.2(c) of this chapter. Such request must provide a 
description of the entity or group and its position within the 
reporting entity, and provide the following certification:
    [Name of the entity(ies)] hereby certifies that to the best of 
its knowledge and belief it meets the conditions for a separate 
reporting entity as described in appendix A to 17 CFR part 420. The 
above named entity also certifies that it has established written 
policies or procedures, including ongoing compliance monitoring 
processes, that are designed to prevent the entity or group of 
entities from:
    (1) Exchanging any of the following information with any other 
aggregating entity (a) positions that it holds or plans to trade in 
a Treasury security; (b) investment strategies that it plans to 
follow regarding Treasury securities; and (c) financing strategies 
that it plans to follow regarding Treasury securities, or
    (2) In any way intentionally acting together with any other 
aggregating entity with respect to the purchase, sale, retention or 
financing of Treasury securities.
    The above-named entity agrees that it will promptly notify 
Treasury in writing when any of the information provided to obtain 
separate reporting entity status changes or when this certification 
is no longer valid.
    Any entity, including any organizational component thereof, that 
previously has received recognition as a separate bidder in Treasury 
auctions from Treasury pursuant to 31 CFR part 356 is also 
recognized as a separate reporting entity without the need to 
request such status, provided such entity continues to be in 
compliance with the conditions set forth in appendix A to 31 CFR 
part 356.

Appendix B to Part 420--Sample Large Position Report

Formula for Determining Whether To Submit a Large Position Report

(Report all components as a positive number or zero in millions of 
dollars at par value)
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Matthew S. Rutherford,
Acting Under Secretary for Domestic Finance.
[FR Doc. 2014-28734 Filed 12-9-14; 8:45 am]
BILLING CODE 4810-39-C