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Commercial Book-Entry Regulations (TRADES)

Where You Hold Your Securities

For information on the options for holding Treasury securities:

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The Commercial Book-Entry System – in Depth

For details of how the commercial book-entry system works

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The TRADES regulation

31 CFR Part 357

The TRADES regulation governs transfers and pledges for all Treasury securities in the commercial book-entry system.

The TRADES regulation is based on Revised Article 8 of the Uniform Commercial Code (UCC), which deals with investment securities.

In issuing the TRADES regulation, we didn’t override state law for those states that have adopted a version of Article 8 of the UCC that is substantially identical to Revised Article 8.

Security entitlements

The TRADES regulations show a difference between holdings of securities at Federal Reserve Banks and holdings at Securities Intermediaries other than Federal Reserve Banks.

The rights and property interests connected to a Security Entitlement of a Participant held on the books of a Federal Reserve Bank are different from other security entitlements, as provided in 31 CFR 357.2.

As stated in Section 357.10(a) of the TRADES regulations, federal law defines the scope and nature of a Participant's Security Entitlement.

The meaning of Security Entitlement under federal law is different than that under Revised Article 8.

However, the scope and nature of a Security Entitlement of an Entitlement Holder below the level of a Participant is defined by applicable state law, as determined in Section 357.1 of the TRADES regulations.

Choice of law

The TRADES regulations specify the law that determines the rights and obligations of persons maintaining securities accounts at the Federal Reserve Banks, as well as the United States and the Federal Reserve Banks.

These rights and obligations are dictated by Treasury regulations, including the TRADES regulations and Uniform Offering Circular, the offering announcement, and Federal Reserve Bank Operating Circulars.

In contrast to holdings of securities at the Federal Reserve Bank level, the regulations also provide that the choice of law for persons holding interests in Treasury securities at levels below the level of persons maintaining Participant's Securities Accounts, will be state law if the state has adopted a version of Article 8 that is substantially identical to Revised Article 8.

The TRADES regulations define Revised Article 8 to mean the 1994 Official Text of the Uniform Commercial Code, Revised Article 8, Investment Securities (with Conforming and Miscellaneous Amendments to Articles 1, 3, 4, 5, 9, and 10).

If the applicable state has not adopted Revised Article 8, then the law is the law of that state, as though Revised Article 8 had been adopted by that state.

State adoptions of versions of Article 8

States that have adopted versions of Revised Article 8 that we determined were "substantially identical" to the uniform version for purposes of the regulations are noted in TRADES regulations and subsequent Federal Register Notices.

Government-sponsored enterprises

A government-sponsored enterprise (GSE) is a privately owned, publicly chartered entity that is created by Congress to lower the cost of capital to key parts of the economy.

A number of government-sponsored enterprises have adopted regulations identical to the TRADES regulations for the securities held in the Federal Reserve Book-Entry System.