Commercial Book-Entry Regulations (TRADES)

The TRADES regulation (31 CFR Part 357) governs transfers and pledges for all Treasury securities in the commercial book-entry system. It's based on Revised Article 8 of the Uniform Commercial Code (UCC), which deals with investment securities.

In issuing the TRADES regulation, Treasury didn't override state law for states that have adopted a version of Article 8 substantially identical to Revised Article 8.

The TRADES regulations distinguish between holdings of securities at Federal Reserve Banks and holdings at other Securities Intermediaries. Federal law defines the scope and nature of a Participant's Security Entitlement at a Federal Reserve Bank, while the scope for an Entitlement Holder below that level is defined by applicable state law.

The TRADES regulations specify which law determines the rights and obligations of persons maintaining securities accounts at the Federal Reserve Banks. For holdings below the Participant level, the choice of law is state law, if the state has adopted a version of Article 8 substantially identical to Revised Article 8.

A government-sponsored enterprise (GSE) is a privately owned, publicly chartered entity created by Congress to lower the cost of capital to key parts of the economy. A number of GSEs have adopted regulations identical to the TRADES regulations for securities held in the Federal Reserve Book-Entry System.