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December 16, 1999

Steven Lofchie, Esq.
David Polk & Wardell
450 Lexington Avenue,
New York, NY 10017

Dear Mr. Lofchie:

This confirms our recent telephone conversation concerning the borrowing of securities under Regulation T.

Section 220.10 of Regulation T allows a creditor to borrow or lend securities to make delivery in the case of short sales, failure to receive securities required to be delivered, or other similar situations. The regulation allows "pre-borrowing" of a security up to one standard settlement cycle in advance of trade date. The standard settlement cycle is currently three business days.

Prior to 1996, "pre-borrowing" a security in advance of a short or fail was prohibited. A 1990 staff opinion noted that pre-borrowing was not permitted at that time, but concluded that paying a commitment fee to reserve particular securities anticipated to be needed for a future borrowing did not violate the regulation.

Although the Board has amended Regulation T to permit limited pre-borrowing, Board staff continues to believe that paying a commitment fee is an alternative to pre-borrowing. Therefore, a creditor who anticipates the need for a security more than three days in advance of trade date may pay a commitment fee to a securities lender without violating section 220.10 of Regulation T.

Yours truly,

(Signed) Scott Holz

Scott Holz

Senior Counsel

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1999 Margin Requirements