[Federal Register Volume 74, Number 103 (Monday, June 1, 2009)]
[Rules and Regulations]
[Pages 26084-26087]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-12787]


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DEPARTMENT OF THE TREASURY

Fiscal Service

31 CFR Part 356

[Docket No. BPD GSRS 09-01; Department of the Treasury Circular, Public 
Debt Series No. 1-93]


Sale and Issue of Marketable Book-Entry Treasury Bills, Notes, 
and Bonds

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. This final rule makes conforming changes to several sections of 
the Uniform Offering Circular to be consistent with Treasury's

[[Page 26085]]

current auction practices. The first change modifies the description of 
Treasury bills to clarify that they may be issued at a discount or at 
par, depending upon the auction results. The second change clarifies 
that the rate or yield bid in Treasury bill or Treasury fixed-principal 
securities auctions must be a positive number or zero. The third change 
eliminates a provision related to ``guaranteed bid'' arrangements that 
was intended for multiple-price auctions. Because Treasury no longer 
conducts multiple-price auctions, the provision is no longer needed or 
effective. The fourth change updates an example of the proration of 
auction awards at the highest accepted yield or discount rate to 
reflect the change in minimum and multiple bid amounts to $100 for all 
Treasury marketable securities auctions that became effective in 2008. 
The fifth change modifies the provision for the notification of auction 
awards and settlement amounts to provide language consistent with 
related provisions of the Uniform Offering Circular. Finally, we are 
updating several references to the Bureau of the Public Debt's Web site 
to reflect the current URL.

DATES: Effective June 1, 2009.

ADDRESSES: This final rule is available on the Bureau of the Public 
Debt's Web site at: http://www.treasurydirect.gov. 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, Lee Grandy, or Kevin 
Hawkins, Department of the Treasury, Bureau of the Public Debt, 
Government Securities Regulations Staff, (202) 504-3632.

SUPPLEMENTARY INFORMATION: Part 356 of title 31 of the Code of Federal 
Regulations, also referred to as the Uniform Offering Circular (``UOC'' 
or ``auction rules''), sets out the terms and conditions for the sale 
and issuance by the Treasury to the public of marketable book-entry 
Treasury bills, notes, and bonds.\1\ The UOC, together with the 
offering announcement for each auction, represents a comprehensive 
statement of the terms and conditions. This final rule makes conforming 
changes to the UOC to reflect Treasury's current auction practices.
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    \1\ The UOC was published as a final rule in January 1993. See 
58 FR 412, January 5, 1993. The circular, as amended, is codified at 
31 CFR part 356.
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I. Treasury Bills Description

    The UOC currently describes Treasury bills as being ``issued at a 
discount.'' \2\ Under certain market conditions, however, an auction 
can result in Treasury bills being issued at par (in essence yielding 
zero percent).\3\ Treasury bill offering announcements,\4\ starting in 
December 2008, clarified, in a footnote, that ``Treasury bills will be 
issued at a discount or at par.'' In keeping with Treasury's practice 
of incorporating the terms and conditions of Treasury auctions into the 
UOC, the description of Treasury bills at 31 CFR 356.5(a)(1) is being 
modified to state that Treasury bills may be ``issued at a discount or 
at par, depending upon the auction results.''
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    \2\ 31 CFR 356.5(a)(1).
    \3\ The 4-week bill auctions conducted on December 9, 16, and 
23, 2008, resulted in Treasury bills being issued at par. See 
Treasury securities auction 2008 press releases for 4-week bills at: 
http://treasurydirect.gov/instit/annceresult/press/preanre/2008/2008_4week.htm.
    \4\ Id.
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II. Competitive Bid Format

    Treasury is adding a sentence to each of the descriptions of the 
competitive bid formats for Treasury bills and Treasury fixed-principal 
securities in 31 CFR 356.12 to clarify that the rate or yield bid must 
be a positive number or zero.\5\
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    \5\ 31 CFR 356.12(c)(1)(i) and (ii).
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III. Guaranteed Bids

    The UOC contains several provisions to regulate bidders \6\ in a 
Treasury auction. We are eliminating a provision at 31 CFR 356.14(a) 
related to ``guaranteed bid'' arrangements in Treasury auctions that is 
no longer needed. Specifically, we are eliminating the provision in 31 
CFR 356.14(a) that states, ``If a bid from a depository institution or 
a dealer fulfills a guarantee to a customer to sell a specified amount 
of securities at an agreed-upon price, or a price fixed in terms of an 
agreed-upon standard, then the bid is a bid of that depository 
institution or dealer. It is not a customer bid.'' This particular 
provision dates back to 1995 when Treasury conducted multiple-price 
auctions, which are auctions in which each successful competitive 
bidder pays the price equivalent to the yield or rate that it bid. 
Prior to the close for submission of competitive bids, certain dealers 
were entering into arrangements to guarantee their customers \7\ a 
price conditioned on the outcome of the auction (e.g., the weighted 
average yield determined in the auction).\8\ This provision was added 
in response to and intended to address that specific practice. In 1998, 
Treasury shifted to single-price auctions for all Treasury marketable 
securities, which are auctions in which all successful bidders pay the 
same price regardless of the yields or rates they each bid.\9\ Because 
Treasury no longer conducts multiple-price auctions, the provision is 
no longer needed or effective. Treasury expects any depository 
institution or dealer guaranteeing bids in a single-price auction to 
reexamine this practice, confirm that the bidder has been properly 
identified on the bid, and raise any questions with Treasury staff. 
Questions related to particular facts and circumstances may be directed 
to the Government Securities Regulations Staff at the telephone number 
listed above.
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    \6\ The UOC defines a ``bidder'' at 31 CFR 356.2 to include 
persons and entities who offer to purchase Treasury securities in an 
auction through a depository institution or dealer.
    \7\ See definition of ``customer'' at 31 CFR 356.2.
    \8\ See 60 FR 13906, March 15, 1995. The ``guarantee bid'' 
provision was subsequently moved from the definition of ``bid'' in 
31 CFR 356.2 to 31 CFR 356.14(a) when the UOC was converted to plain 
language in 2004. See 69 FR 45202, July 28, 2004.
    \9\ See November 1998 Quarterly Refunding Statement remarks by 
Gary Gensler, Treasury Assistant Secretary for Financial Markets 
(October 28, 1998) http://www.treas.gov/press/releases/rr2782.htm.
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    Treasury expects transparency in the submission of all auction 
bids, including those for customers, to maintain the integrity of the 
auction process. All auction participants, including bidders, 
customers, and submitters must comply with Treasury's auction rules. 
This rule makes no changes to the general UOC requirements of 31 CFR 
356.12 bidding restrictions, 31 CFR 356.13 net long position reporting, 
31 CFR 356.14 proper identification of customers, 31 CFR 356.16 
certifications, and 31 CFR 356.24 confirmations required from any 
customer awarded a par amount equal to or greater than $750 million.

IV. Proration Example

    On March 20, 2008, Treasury amended the UOC to lower the minimum 
and multiple par amounts for which bidders may bid in all Treasury 
marketable securities auctions from $1,000 to $100.\10\ We are updating 
the example in 31 CFR 356.21(a) of the proration of auction awards at 
the highest accepted yield or discount rate to reflect the $100 minimum 
and multiple bid amounts.
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    \10\ See 73 FR 14937, March 20, 2008.
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V. Settlement Notification

    The UOC includes certain notification requirements of auction 
awards. We are making a nonsubstantive change to the

[[Page 26086]]

first sentence in 31 CFR 356.24(c) to conform to the language in 31 CFR 
356.24(a).

VI. Web Site References

    Information regarding Treasury's marketable securities auctions can 
be found on or accessed by way of the Bureau of the Public Debt's Web 
site. The Web site has changed and it can now be accessed at http://www.treasurydirect.gov instead of its previous address, http://www.publicdebt.treas.gov. Therefore, we are updating the references to 
the Web site at 31 CFR 356.23(a) and 31 CFR 356.31(a) accordingly.

Procedural Requirements

    This final rule only makes conforming changes to the UOC and, 
therefore, does not meet the criteria for a ``significant regulatory 
action'' pursuant to Executive Order 12866. Because this rule relates 
to public contracts and procedures for United States securities, the 
notice, public comment, and delayed effective date provisions of the 
Administrative Procedure Act are inapplicable, pursuant to 5 U.S.C. 
553(a)(2).
    As no notice of proposed rulemaking is required, the provisions of 
the Regulatory Flexibility Act (5 U.S.C. 601, et seq.) do not apply.
    There is no new collection of information contained in this final 
rule, and, therefore, the Paperwork Reduction Act does not apply. The 
Office of Management and Budget has approved the collections of 
information already contained in 31 CFR part 356, under control number 
1535-0112. Under the Paperwork Reduction 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.

List of Subjects in 31 CFR Part 356

    Bonds, Federal Reserve System, Government securities, Securities.

0
For the reasons set forth 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. Section 356.5 is amended by revising paragraph (a)(1) to read as 
follows:


Sec.  356.5  What types of securities does the Treasury auction?

* * * * *
    (a) * * *
    (1) Are issued at a discount or at par, depending upon the auction 
results;
* * * * *

0
3. Section 356.12 is amended by revising paragraphs (c)(1)(i) and (ii) 
to read as follows:


Sec.  356.12  What are the different types of bids and do they have 
specific requirements or restrictions?

* * * * *
    (c) * * *
    (1) * * *
    (i) Treasury bills. A competitive bid must show the discount rate 
bid, expressed with three decimals in .005 increments. The third 
decimal must be either a zero or a five, for example, 5.320 or 5.325. 
We will treat any missing decimals as zero, for example, a bid of 5.32 
will be treated as 5.320. The rate bid may be a positive number or 
zero.
    (ii) Treasury fixed-principal securities. A competitive bid must 
show the yield bid, expressed with three decimals, for example, 4.170. 
We will treat any missing decimals as zero, for example, a bid of 4.1 
will be treated as 4.100. The yield bid may be a positive number or 
zero.
* * * * *

0
4. Section 356.14 is amended by revising paragraph (a) to read as 
follows:


Sec.  356.14  What are the requirements for submitting bids for 
customers?

    (a) Institutions that may submit bids for customers. Only 
depository institutions or dealers may submit bids for customers (see 
definitions at Sec.  356.2), or for customers of intermediaries, under 
the requirements set out in this section.
* * * * *

0
5. Section 356.21 is amended by revising paragraph (a) to read as 
follows:


Sec.  356.21  How are awards at the high yield or discount rate 
calculated?

    (a) Awards to submitters. We generally prorate bids at the highest 
accepted yield or discount rate under Sec.  356.20(a)(2) of this part. 
For example, if 80.15% is the announced percentage at the highest yield 
or discount rate, we award 80.15% of the amount of each bid at that 
yield or rate. A bid for $100 million at the highest accepted yield or 
discount rate would be awarded $80,150,000 in this example. We always 
make awards for at least the minimum to bid, and above that amount we 
make awards in the appropriate multiple to bid. For example, Treasury 
bills may be issued with a minimum to bid of $100 and multiples to bid 
of $100. Say we accept an $18,000 bid at the high discount rate, and 
the percent awarded at the high discount rate is 88.27%. We would award 
$15,900 to that bidder, which is an upward adjustment from $15,888.60 
($18,000 x .8827) to the nearest multiple of $100. If we were to award 
4.65% of bids at the highest accepted rate, for example, the award for 
a $100 bid at that rate would be $100, rather than $4.65, in order to 
meet the minimum to bid for a bill issue.
* * * * *

0
6. Section 356.23 is amended by revising paragraph (a) to read as 
follows:


Sec.  356.23  How are the auction results announced?

    (a) After the conclusion of the auction, we will announce the 
auction results through a press release that is available on our Web 
site at http://www.treasurydirect.gov.
* * * * *

0
7. Section 356.24 is amended by revising paragraph (c) to read as 
follows:


Sec.  356.24  Will I be notified directly of my awards and, if I am 
submitting bids for others, do I have to provide confirmations?

* * * * *
    (c) Notification of awards and settlement amounts to a depository 
institution having an autocharge agreement with a submitter or a 
clearing corporation. We will provide notice to each depository 
institution that has entered into an autocharge agreement with a 
submitter or a clearing corporation of the amount to be charged, on the 
issue date, to the institution's funds account at the Federal Reserve 
Bank servicing the institution. We will provide this notification no 
later than the day after the auction.
* * * * *

0
8. Section 356.31 is amended by revising paragraph (a) to read as 
follows:


Sec.  356.31  How does the STRIPS program work?

    (a) General. Notes or bonds may be ``stripped''--divided into 
separate principal and interest components. These components must be 
maintained in the commercial book-entry system. Stripping is done at 
the option of the holder, and may occur at any time from issuance until 
maturity. We provide the CUSIP numbers and payment dates for the 
principal and interest components in auction announcements and on our

[[Page 26087]]

Web site at http://www.treasurydirect.gov.
* * * * *

Gary Grippo,
Acting Fiscal Assistant Secretary.
[FR Doc. E9-12787 Filed 5-28-09; 4:15 pm]
BILLING CODE 4810-39-P