[Federal Register: March 20, 2008 (Volume 73, Number 55)]
[Rules and Regulations]
[Page 14937-14939]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr20mr08-11]
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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
govsecreg@bpd.treas.gov. Policy Information: Karthik Ramanathan
(Director), Department of the Treasury, Office of Debt Management,
(202) 622-2042 or e-mail at debt.management@do.treas.gov.
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