NASD Notice to Members 96-39 - June 1996

Request for Comments on Proposed Changes to Regulations G, T and U

Executive Summary

In conjunction with the amendments to Regulation T (Reg. T) which are described in Notice to Members 96-37, the Board of Governors of the Federal Reserve System (Fed) is also requesting comments on proposed changes to Regulations G, T, and U. Reg. T covers extensions of credit by and to broker/dealers; Reg. U covers extensions of credit by banks; and Reg. G covers extensions of credit by all other U.S. lenders.

 

The Fed is proposing to allow a broker/dealer to extend "good faith" credit on any non-equity security rather than only those currently permitted by Fed rules; allow lending on non-equity securities to occur in a new "non-equity" account, absent the restrictions currently imposed in the margin account; remove restrictions on the ability of broker/dealers to calculate required margin for non-equity securities on a "portfolio" basis; ease or eliminate the Fed's collateral requirements for the borrowing and lending of securities; exempt lending to foreign persons on foreign securities by foreign branches of U.S. broker/dealers; remove a Fed interpretation that prevents options from serving as cover in lieu of margin for a short sale; and allow banks to lend against exchange-traded options to the extent permitted by the exchange listing the option. The Fed also is seeking comment on whether it should expand the number of equity securities eligible for loan value under Reg. T, and on whether it should amend Regs. G and U to modify their method for determining which equity securities are eligible for loan value. Comments are due on or before July 1, 1996.

 

Questions concerning this Notice may be directed to Anne Harpster, Compliance Department, at (202) 728-8092.