Title 31—Money and Finance: Treasury--Volume 1
PART 375—MARKETABLE TREASURY SECURITIES REDEMPTION OPERATIONS
§ 375.0   What authority does the Treasury have to redeem its securities?
Section 3111 of Title 31 of the United States Code authorizes the Secretary of the Treasury to use money received from the sale of an obligation and other money in the general fund of the Treasury to buy, redeem, or refund, at or before maturity, outstanding bonds, notes, certificates of indebtedness, Treasury bills, or savings certificates of the United States Government. For the purposes of this part, we will refer to these outstanding obligations as “securities”.
§ 375.1   Where are the rules for the redemption operation located?
The provisions in this part and the redemption operation announcement govern the redemption of marketable Treasury securities under 31 U.S.C. 3111. (See § 375.10.)
§ 375.2   What special definitions apply to this rule?
The definitions in 31 CFR part 356 govern this part except as follows:
Accrued interest means an amount payable by the Treasury as part of the settlement amount for the interest income earned between the last interest payment date up to and including the settlement date.
Bank means the Federal Reserve Bank of New York.
Customer means a person or entity on whose behalf a submitter has been directed to submit an offer of a specified amount of securities in a specific redemption operation.
Minimum offer amount means the smallest par amount of a security that may be offered to the Treasury. We will state the minimum offer amount in the redemption operation announcement.
Multiple means the smallest additional par amount of a security that may be offered to the Treasury. We will state the multiple in the redemption operation announcement.
Offer means an offer to deliver for redemption a stated par amount of a specific security to the Treasury at a stated price.
Price means the dollar amount to be paid for a security expressed as a percent of its current par amount.
Privately held amount means the total amount outstanding of a security less holdings of the Federal Reserve System and Federal Government accounts.
Redemption amount means the maximum par amount of securities that we are planning to redeem through a redemption operation. We will state the redemption amount in the redemption operation announcement.
Redemption operation means a competitive process by which the Treasury accepts offers of marketable Treasury securities that by their terms are not immediately payable.
Security means an outstanding unmatured obligation of the United States Government that the Secretary is authorized to buy, redeem or refund under section 3111 of Title 31 of the United States Code.
Settlement means full and complete delivery of and payment for securities redeemed.
Settlement amount means the par amount of each security that we redeem, multiplied by the price we accept in a redemption operation, plus any accrued interest.
Settlement date means the date specified in the redemption operation announcement on which you must deliver a security to the Treasury for payment.
Submitter means an entity submitting offers directly to the Treasury for its own account, for the account of others, or both. (See § 375.11(a)).
Tender means a computer transmission or document submitted in a redemption operation that contains one or more offers.
We (“us”) means the Secretary of the Treasury and his or her delegates, including the Treasury Department, the Bureau of the Fiscal Service, and their representatives. The term also includes the Federal Reserve Bank of New York, acting as fiscal agent of the United States.
You means a prospective submitter in a redemption operation.
§ 375.3   What is the role of the Federal Reserve Bank of New York in this process?
As fiscal agent of the United States, the Federal Reserve Bank of New York performs various activities necessary to conduct a redemption operation under this part. These activities may include but are not limited to:
(a) Accepting and reviewing tenders;
(b) Calculating redemption operation results;
(c) Issuing notices of redemptions;
(d) Accepting deliveries of Treasury securities at settlement; and
(e) Processing the Treasury payment for securities delivered at settlement.
§ 375.10   What is the purpose of the redemption operation announcement?
We provide public notice that we are redeeming Treasury securities by issuing a redemption operation announcement. This announcement lists the details of each proposed redemption operation, including the maximum redemption amount, the range of maturities of eligible securities, descriptions of the securities that fall within that maturity range, and the redemption operation and settlement dates. The redemption operation announcement and this part specify the terms and conditions of a redemption operation. If anything in the redemption operation announcement differs from anything in this part, the redemption operation announcement will apply. Accordingly, you should read the applicable redemption operation announcement along with this part.
§ 375.11   Who may participate in a redemption operation?
(a) Submitters. To be a submitter, you must be an institution that the Federal Reserve Bank of New York has approved to conduct open market transactions with the Bank.
(b) Others. A person or entity other than a submitter may participate only if it arranges to have an offer or offers submitted on its behalf by a submitter.
§ 375.12   How do I submit an offer?
As a submitter, you must submit an offer in a tender to the Treasury via the Federal Reserve Bank of New York. You must submit any tenders in an approved format and the Bank must receive them prior to the closing time stated in the redemption operation announcement. If we do not receive your tenders timely, we will reject them. Your tenders are binding on you after the closing time specified in the redemption operation announcement. You are responsible for ensuring that we receive your tenders on time. We will not be responsible in any way for any unauthorized tender submissions or for any delays, errors, or omissions in submitting tenders.
§ 375.13   What requirements apply to offers?
(a) General. You may only submit competitive offers (specifying a price). All offers must state the security description, par amount, and price of each security offered. All offers must equal or exceed the minimum offer amount, and be in the multiple, stated in the redemption operation announcement.
(b) Price format. You must express offered prices in terms of price per $100 of par with three decimals, e.g., 102.172. The first two decimals represent fractional 32nds of a dollar. The third decimal represents eighths of a 32nd of a dollar, and must be a 0, 2, 4, or 6. For example, an offer of 102.172 means one hundred two and seventeen 32nds and two eighths of a 32nd, or in decimals, 102.5390625.
(c) Maximum number of offers. There is no limit on the number of offers you may make for each eligible security. There is also no limit on the number of eligible securities you may offer.
§ 375.14   Do I have to make any certifications?
By submitting a tender offering a security or securities for sale, you certify that you are in compliance with this part and the redemption operation announcement.
§ 375.15   Who is responsible for delivering securities?
As a submitter, you are responsible for delivering any securities we accept in the redemption operation, including any securities for which you submitted offers on behalf of others. (See § 375.23.) All securities you deliver must be free and clear of all liens, charges, claims, and any other restrictions.
§ 375.20   When will the Treasury decide on which offers to accept?
We will determine which offers or portions of offers to accept after the closing time for receipt of tenders. All such determinations will be final.
§ 375.21   When and how will the Treasury announce the redemption operation results?
We will make an official announcement of the redemption operation results through a press release. For each security we redeem, the press release will include such information as the amounts offered and accepted, the highest price accepted, and the remaining privately held amount outstanding.
§ 375.22   Will I receive confirmations and, if I am submitting offers for others, do I have to provide confirmations?
(a) Confirmations to submitters. We will provide a confirmation of acceptance or rejection in the form of a results message to submitters of offers by the close of the business day of the redemption operation.
(b) Confirmation of customer offers. If you submit a successful offer for a customer, you are responsible for notifying that customer of the impending redemption.
§ 375.23   How does the securities delivery process work?
If any of the offers you submitted are accepted, you must transfer the correct book-entry Treasury securities in the correct par amount against the correct settlement amount on the settlement date. You must deliver the securities to the account specified in the redemption operation announcement.
§ 375.30   Does the Treasury have any discretion in this process?
(a) We have the discretion to:
(1) Accept or reject any offers or tenders submitted in a redemption operation;
(2) Redeem less than the amount of securities specified in the redemption operation announcement;
(3) Add to, change, or waive any provision of this part; or
(4) Change the terms and conditions of a redemption operation.
(b) Our decisions under this part are final. We will provide a public notice if we change any redemption operation provision, term or condition.
§ 375.31   What could happen if someone does not fully comply with the redemption operation rules or fails to deliver securities?
(a) General. If a person or entity fails to comply with any of the redemption operation rules in this part, we will consider the circumstances and take what we deem to be appropriate action. This could include barring the person or entity from participating in future redemption operations under this part and future auctions under 31 CFR part 356. We also may refer the matter to an appropriate regulatory agency.
(b) Liquidated damages. If you fail to deliver securities on time, we may require you to pay liquidated damages of up to 1% of your projected settlement amount.