Disclosures and Considerations for Investors in Auction Rate Securities
Auction Rate Securities
Auction Rate Securities (ARS) are long term securities whose interest rate is reset periodically, typically every 7, 28, or 35 days. Because the interest rate is reset frequently, the interest rate is expected to move in relation to money market instruments of similar credit quality and with a maturity similar to the reset period of the ARS. Generally, as with most securities, the higher the credit quality, the greater the investor demand, and therefore the lower the interest rate.
When Issuers first issue ARS, they select an Auction Agent (as defined below along with other capitalized terms) to receive orders generated in the periodic Auctions prior to the Submission Deadline and to determine the Clearing Rate that applies to each Auction. Issuers also select Broker-Dealers, such as Hilltop Securities Inc. (“HTS”) to solicit orders to buy and sell ARS in each Auction.
The periodic interest rate on ARS is determined in an Auction that is governed by a set of Auction Procedures established by the Issuer and its Auction Agent and described in the offering documents for the ARS. The Auction Procedures generally provide for the steps investors must take to submit orders in the Auction through a Broker-Dealer. Some ARS programs have a single Broker-Dealer while some have multiple Broker-Dealers. Whenever a particular practice or procedure is described herein, it is based upon HTS’s experience as being generally or typically applied in most processes; however, in any particular case, the applicable practices and procedures are dictated and governed by the Auction Procedures established for the ARS in question.
During the Auction process, existing Holders may advise the Broker-Dealer of:
- the amount of securities they wish to retain, regardless of the Clearing Rate (Hold Order)
- the amount of securities they wish to retain, as long as the Clearing Rate is no lower than a specified rate (Hold at Rate)
- the amount of securities they wish to sell, regardless of the Clearing Rate (Sell Order)
Prospective Holders may submit a Bid (Buy Order) for the amount of securities they wish to purchase as long as the Clearing Rate is no lower than a specified rate. If an Existing Holder fails to place an order of any type in the Auction, most Auction Procedures provide that such holder will be deemed to have submitted a Hold Order. After the Submission Deadline, the Auction Agent ranks the Orders by Rate, from lowest to highest. Hold Orders are allocated first. If there are any Sell Orders, the Auction Agent then accepts Bids with the lowest Rate first, and then successively higher Rates until all Sell Orders are filled. If there are multiple Bids at the final rate, the Auction agent will allocate securities among the bidders of such Rate on a pro-rata basis. After the Auction is concluded, all Holders will receive the same Rate for the next period, which is sometimes referred to as the Clearing Rate. The highest yielding bid that clears the Auction is sometimes referred to as the Cover Bid.
All Hold Auctions
If all Existing Holders enter Hold Orders, with no rate specified, or are deemed Held because they enter no order at all, the Auction is called an All Hold Auction and the new Rate will be equal to the All Hold Rate, typically equal to an Index or a percentage of a specified reference rate, such as LIBOR. In most cases, the ALL Hold Rate will be materially lower than a market rate for similar securities. This is to encourage participation by Bidders at specified rates during the Auction.
If the Auction Agent receives more Sell Orders than Hold Orders and Buy Orders, the Auction is said to be a Failed Auction, and the Auction Procedures generally provide that the coupon is set at the Maximum Rate, typically a multiple of a reference rate, such as LIBOR, or a fixed percentage, such as 15%. The Maximum Rate is designed to compensate the Holder for the loss of liquidity resulting from a Failed Auction and to encourage the Issuer to consider restructuring, redeeming or simply hiring another Broker-Dealer to solicit Bids in the next Auction.
HTS, acting as a Broker-Dealer, may, although not required to do so, submit orders for its own account in an Auction, either as a bidder or a seller, and routinely does so in its sole discretion. HTS may submit a Bid before or after it has seen the Orders of others, as long as any Bid it places is a Bid it believes in good faith to be at an Estimated Market Rate. This Bid is sometimes referred to as a “Cover Bid”. It may submit such a Bid, among other reasons, to avoid having a Failed Auction or to avoid having an Auction clear at a Rate it believes is materially above the Estimated Market Rate. If HTS submits an order for its own account, it would have an advantage over other bidders because HTS would have knowledge of the other orders placed through HTS in that auction and could determine the rate and size of its order so as to ensure that its order is likely to be accepted in the auction and that the auction is likely to clear at a particular rate.
In instances where HTS is the only Broker-Dealer selected by the issuer in an Auction, HTS would be the only Broker-Dealer that submits orders to the Auction Agent in that Auction. As a result, in such circumstances, HTS could discern the clearing rate before the orders are submitted to the Auction Agent and set the clearing rate with its order.
HTS may routinely encourage bidding by others in Auctions, including to prevent a Failed Auction or to prevent an Auction from clearing at a rate that HTS believes does not reflect the market for the particular ARS being auctioned. HTS may encourage such bids even after obtaining knowledge of the other orders submitted through it. Bids by HTS, or by those it may encourage to place bids likely will affect both (i) the Clearing Rate, including preventing the auction rate from being set at the Maximum Rate or otherwise causing bidders to receive a higher or lower rate than they might have received had HTS not bid or not encouraged others to bid and (ii) the allocation of ARS being auctioned, including displacing some bidders who may have their bids rejected or receive fewer ARS than they would have received if HTS had not bid or encouraged others to bid. Thus, the fact that an auction clears successfully does not mean that an investment in the ARS involves no significant liquidity or credit risk. HTS is not obligated to continue to place such bids or encourage other bidders to do so in any particular auction to prevent a Failed Auction or from clearing at a rate HTS believes does not reflect the market for the securities. Investors should not assume that HTS will do so or that Failed Auctions and unfavorable auction rates will not occur.
In order to provide guidance to investors as to what Clearing Rate a particular Auction might produce, many Broker-Dealers, including HTS, provide oral or written Price Talk. Price Talk represents the Broker-Dealer’s good faith judgment, at any given time, of the range of likely Clearing Rates for an Auction, based on market and other information. Such information may include, among other things, the Clearing Rates at prior Auctions for these as well as similar securities recently auctioned, credit quality of the Issuer, and general economic conditions. Price Talk is not a guaranty, and it is not intended to restrict the Bids of any Holder or Prospective Holder, including the Broker-Dealer, in any way. Neither does Price Talk constitute a guaranty that the Clearing Rate will be established within the specified range or at any particular level.
Limited Secondary Market
Investors should be aware that the secondary market for ARS is limited, and is most likely to be limited to the Broker-Dealer responsible for conducting the Auctions. Investors that wish to liquidate their holdings between auctions are subject to changes that have occurred in market conditions that may, as with most securities, affect the price a Broker-Dealer is willing to pay. While as a matter of practice, many Broker-Dealers, including HTS, attempt to maintain an orderly market for ARS, both during the Auction and in the secondary market, they are under no obligation to do so. Factors that may influence a Broker-Dealer’s decision to provide support include current inventory levels of the Broker-Dealer and the general trend in interest rates, among others.
Because Broker-Dealers, such as HTS, are employed and paid a fee by the Issuer to solicit Bids for the Auction, there is a potential for a conflict of interest between the Issuer, the investor and the Broker-Dealer. Investors should be aware that the Broker- Dealer, including HTS, may and frequently will, submit Bids for its own account at any time prior to the Submission Deadline. Further, the Broker-Dealer will have knowledge of other Bids before it places its own, except in the case of a multi Broker-Dealer Auction where the Broker-Dealer would not have knowledge of bids or orders placed with the other Broker-Dealers through the Auction Agent. The effects of such bidding may alter the results of the Auction, including influencing or setting the clearing rate, and may serve to prevent a Failed Auction, giving an appearance of liquidity that would not exist except for the Broker-Dealer’s bids. The Broker-Dealer, in its discretion, may also prevent an Auction from clearing at a Rate that it believes is materially above an Estimated Market Rate. The effects of a Broker-Dealer bidding in this manner include, but are not limited to, the result that an investor might not receive securities that it would have otherwise been awarded, and a lower interest rate might prevail than otherwise
would have occurred. In the case of an All Hold Auction, the Issuer would benefit from the below market rate. A Broker-Dealer is generally not allowed to, and HTS does not, pass along information of an impending All Hold outcome unless it is able to contact all bidders, which may not be possible.
Applicable Law and Industry Standards
As a Broker-Dealer submitting orders into Auctions and engaging in transactions for its own account and for the account of customers, HTS is subject to the securities laws of the United States, the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”), the rules of the FINRA and the rules of the Municipal Securities Rulemaking Board (“MSRB”) with respect to Auction Rate Securities that are municipal securities.
Securities and Exchange Commission Inquiries
On May 27, 2008, the SEC announced it had settled its investigation against First Southwest Company regarding their respective practices and procedures in the Auction Rate Securities Market. Under the Order, the Commission found that First Southwest willfully violated Sections 17(a)(2) of the Securities Act of 1933 (the “Securities Act”) by engaging in violative practices in connection with certain auctions for auction rate securities. Without adequate disclosure, First Southwest intervened in auctions by bidding for its proprietary account to prevent failed auctions and to prevent all-hold auctions. In addition, First Southwest agreed to cease and desist from violating certain provisions of the securities laws, to provide customers written descriptions of its material Auction practices and procedures, and to implement procedures reasonably designed to detect and prevent any failures by First Southwest Company to conduct the Auction process in accordance with disclosed procedures. The SEC order may be viewed at the following site:
All Hold Rate: The Rate that will apply to a new Rate Period if all existing Holders determine to hold their ARS without specifying a minimum Rate, or are deemed held because no order was submitted.
Auction: A process in which Holders and Prospective Holders for an issue of ARS indicate their interest in continuing to hold or purchase such securities. The Auction Agent reviews all Orders and determines the lowest Rate that will result in the sale of all securities being auctioned in accordance with the applicable Auction Procedures.
Auction Agent: An agent of the issuer or the trustee for the ARS, usually a bank, which, under the Auction Procedures, receives Orders and determines the Clearing Rate and the allocation of ARS among Auction participants.
Auction Procedures: The procedures governing the conduct of an Auction, usually set forth in the indenture or resolution covering the securities and summarized in the prospectus or offering statement for the issue or in supplemental disclosure documents.
Auction Rate Securities: Securities whose Rate is reset periodically based on an Auction. Bid: A direction by a Holder or Prospective Holder specifying the principal amount of Auction Rate Securities which (i) a Holder commits to continue to hold for the next succeeding Rate Period if the Clearing Rate for such Rate Period is not less than the Rate per annum specified in such Bid or (ii) a Holder or Prospective Holder offers to purchase if the Clearing Rate for the next succeeding Rate Period is not less than the Rate per annum specified in such Bid. Note that in clause (i) above, if the Clearing Rate is less than the Rate specified by a Holder, such Holder is obligated to sell such Auction Rate Securities.
Bidder: Each Holder and Prospective Holder who places a Bid.
Broker-Dealer: A Broker-Dealer designated by an Issuer in a Broker-Dealer Agreement to solicit Orders for Auction Rate Securities.
Clearing Rate: In an Auction, the Rate for the next Rate Period determined by the Auction Agent to be the lowest Rate at which there are purchasers willing to buy all Auction Rate Securities offered for sale in such Auction.
Cover Bid: A Bid placed by a Broker-Dealer for its own account for all or part of the Auction Rate Securities
Estimated Market Bid: A bona fide Bid at the Broker-Dealer's Estimated Market Rate.
Estimated Market Rate: A Rate or range of Rates which, in the Broker-Dealer's good faith judgment, reflects a fair and reasonable Rate, taking into consideration such circumstances as it believes are relevant, including prevailing market conditions with respect to such security at the time of the determination, general economic conditions and trends, current Rates for comparable securities, and the issuer's financial condition and prospects.
Failed Auction: An Auction at which the Auction Agent does not receive sufficient Orders at or below the specified Maximum Rate to purchase all the securities being sold. In the case of a Failed Auction, the Rate is set at the Maximum Rate.
Holders: The persons who are then the beneficial owners of the ARS.
Maximum Rate: The Rate applied by the Auction Procedures to a Failed Auction, which is often a multiple of a reference Rate, such as LIBOR or an index of Treasury securities, not to exceed a fixed cap. The multiple may depend on the credit rating of the issuer of the securities. The Maximum Rate may also be an absolute number such as 15%.
Order: (i) A Bid, (ii) a Hold Order, i.e. a direction by a Holder specifying the principal amount of Auction Rate Securities which it will continue to hold regardless of the Clearing Rate in the ensuing Auction or (iii) a Sell Order, i.e. a direction by a Holder specifying the principal amount of ARS that it will sell regardless of the Clearing Rate in the ensuing Auction.
Price Talk: A range of Rates that represents the good faith judgment of a Broker-Dealer of the range within which the Auction is likely to clear. The Price talk may be based, among other things, on prevailing market conditions with respect to a security at the time of the determination, general economic conditions and trends, the Clearing Rate in recent Auctions for those securities and comparable securities and the issuer's financial condition and prospects. Price Talk serves only as a guideline for investors as to where a Broker-Dealer believes that the Auction is likely, but not guaranteed, to clear.
Prospective Holder: Those persons who place a Bid in an Auction to become owners of the ARS.
Rate: An interest rate, in the case of auction rate bonds, or dividend rate, in the case of auction rate preferred stock.
Rate Period: The period of time for which the Rate applies, as determined by the Auction.
Submission Deadline: The time by which all Orders must be submitted to the Auction Agent by the Broker-Dealer. Broker-Dealers often set earlier internal deadlines for the receipt of orders to allow sufficient time to process and transmit orders to the Auction Agent prior to the actual Submission Deadline.
Practices, Procedures and Principles Applicable to Auction Rate Securities
In September 2007, the Securities Industry and Financial Markets Association (“SIFMA”) released Best Practices for Broker-Dealers of Auction Rate Securities (“Best Practices”), which were developed by a SIFMA committee of experienced traders, lawyers and compliance officers whose member firms act as Broker-Dealers in Auction Rate Securities programs. Additionally, several banks that act as Auction Agents for such auction programs were consulted. These Best Practices represent acceptable industry standards of conduct, which HTS herein adopts as its own Practices and Procedures in order to continue our commitment to integrity in the marketplace.
The objective of the Auction is to establish a Rate for the next Auction Period
The objective of the Auction is to establish a Rate for the Next Auction Period.
HTS’s Obligation to the issuer is to solicit Bids
Hilltop Securities Inc. is generally designated in a Broker-Dealer Agreement as a Broker Dealer to contact Owners and Potential Owners and solicit Bids for the securities. We do not guarantee to any issuer that the Auction will result in the lowest possible Rate for the securities. While we are not generally required to make an orderly market in the Auction Rate Securities, we may, in our discretion, take action to promote an orderly market consistent with industry best practices.
In multi-dealer programs each Broker Dealer must act independently. The Broker– Dealers may not share with one another any information about the Orders that they have received or that they may submit or their estimates of possible Clearing Rates, or otherwise communicate with one another about the possible results of the Auction. A Broker-Dealer may, however, share with broker-dealers that are not designated as program Broker-Dealers any information that the Broker-Dealer may share with its own customers (such as Price Talk). In addition, when we participate in a syndicate for an initial offering of Auction Rate Securities, prior to the first Auction, we are permitted to communicate with other prospective dealers participating in the syndicate in connection with the initial offering.
HTS receives Broker-Dealer fees from issuers
When HTS has been appointed by the issuers of Auction Rate Securities to serve as a dealer for the related Auctions it is generally paid by those issuers for its services pursuant to the Broker-Dealer Agreement. Those agreements generally provide that HTS will receive form the issuer Broker-Dealer fees usually based on an annual percentage of
the principal amount of the Auction Rate Securities sold or successfully placed through HTS. As a result, our interests in conducting Auctions may differ form those of investors who participate in Auctions.
In some cases we may share a portion of the fees we receive from the issuer with other broker-dealers that submit orders through us that we successfully place in Auctions. Similarly, with respect to auctions for other Auction Rate Securities for which we do not serve as a Broker-Dealer, the other firms that serve as Broker-Dealers in those Auctions may share fees with us for orders that we submit through those firms that those firms successfully place in those Auctions.
HTS’s obligation to Existing Owners and Potential Owners is a normal dealer obligation to persons purchasing securities from a Broker-Dealer.
The obligation of HTS to Existing Owners and Potential Owners who Bid for and sell Auction Rate Securities is no more extensive than normal dealer obligations governed by existing securities law.
HTS generally submits orders to sell all of our Auction Rate Securities in each Auction of which we are the beneficial owner
HTS is permitted, but not obligated, to submit Orders in Auctions for its own account either as a Bidder or a seller and routinely does so in the Auction Rate Securities market in its sole discretion. Although we are generally not required to do so by the Auction Rate Procedures, it is our practice to submit an Order into the Auction to sell all Auction Rate Securities that our Auction Desk holds for our own account on the date of an Auction. When we submit an Order for our own account, we are likely to have an advantage over other Bidders because we will have knowledge of some or all of the other Orders placed through us in that Auction and, thus, could determine the rate and size of our Order so as to ensure that our Order is likely to be accepted in the Auction and that the Auction is likely to clear at a particular rate. For this reason, and because we are appointed and paid by the issuer to serve as a Broker-Dealer in the Auction, our interests in conducting an Auction may differ from those of Existing Owners and Potential Owners who participate in Auctions. We would not have knowledge of Orders submitted to the Auction Agent by any other firm that is, or may in the future be, appointed to accept Orders pursuant to a Broker-Dealer Agreement.
HTS may submit Bid Orders in each Auction
We may make multiple Bids for our own account provided that each Bid is at a market rate. We may withdraw or modify a Bid for our own account prior to the Submission Deadline, unless the Auction Rate Procedures provide that all Bids are irrevocable when made.
While we are not obligated to do so, we routinely place one or more Bids in an Auction for our own account to acquire the securities for our inventory or to prevent an Auction from failing or clearing at a Rate that we believe does not reflect the market for the securities. We may place such Bids even after obtaining knowledge of some or all of the other Orders submitted through us. When bidding for our own account, we may also bid outside or inside the range of Rates that we post in our Price Talk, but we do not make Bids outside of the Estimated Market Rate.
We may also encourage bidding by others in Auctions. We may encourage such Bids even after obtaining knowledge of some or all of the other Orders submitted through our Auction Desk.
Bids by HTS or by those it encourages to place Bids are likely to affect (i) the Auction Rate – including preventing the Auction Rate from being set at the Maximum Rate or otherwise causing Bidders to receive a higher or lower rate than they might have received had we not bid or encouraged others to bid and (ii) the allocation of securities being auctioned – including displacing some Bidders who may have their Bids rejected or receive fewer securities than they would have received if we had not bid or encouraged others to bid. Because of these practices, the fact that an Auction clears successfully does not mean that an investment in the securities involves no significant liquidity or credit risk. We are not obligated to continue to place such Bids or encourage others to bid in any particular Auction to prevent an Auction from failing or clearing at a Rate we believe does not reflect the market for the securities. Investors and issuers should not assume that we will do so or that Failed Auctions will not occur. Investors should also be aware that Bids by us or those we may encourage to place Bids may cause lower Rates to result.
Except for the aggregation of each of (i) Bids at the same Rate by Existing Owners and (ii) Bids at the same Rate by Potential Owners, in each case into a single Bid at that Rate for the aggregate amount, HTS separately submits all Orders to the Auction Agent
HTS does not net Orders to sell against Bids. If we submit an aggregated Order at a particular Rate and are awarded securities with respect to that Order at that Rate, we are required to allocate such award among our customers bidding in the Auction in accordance with the allocation procedures in the Auction Procedures (including procedures required to satisfy minimum denomination and unit size restrictions).
HTS provides Price Talk to Existing Owners and Potential Owners generally before the start of the Auction
Before the start of an Auction for the securities, HTS, in its discretion, may make available to its customers who are Existing Owners and Potential Owners, the Firm’s good faith judgment of the range of likely clearing rates for the Auction based on market and other information. This information is known as “Price Talk.” Price talk is not a guaranty that the Auction Rate established through the Auction for the securities will be within the Price Talk, and Existing Owners and Potential Owners are free to use it or ignore it. HTS may occasionally update and change the Price Talk based on changes in the credit quality or macroeconomic factors that are likely to result in a change in interest rate levels, such as announcement by the Federal Reserve Board of a change in the Federal Funds rate or an announcement by the Bureau of Labor Statistics of unemployment numbers. HTS will communicate Price Talk and any changes to Price Talk to all Potential Owners.
HTS may not communicate the quantity, level, or size of orders in an Auction to any other bidder; disclose any Bids (either generally or specifically); disclose a specific probable clearing rate or whether the clearing rate will likely fall within the Price Talk range; disclose any information regarding any Investor’s orders; promise, guarantee or inform an Investor that the Investor’s order will succeed at a given rate; or make any statement that could be interpreted to achieve a similarly inappropriate effect.
HTS acts independently when participating in multi-dealer programs. Price Talk is not shared with other Broker-Dealers participating in these programs.
HTS will not inform Bidders that there are no Bids at a Rate in order to avoid an All Hold Rate
HTS will not inform an Existing Owner that there are no Bids at a Rate and that the resulting Rate will be an All Hold Rate. However, HTS will take steps to ensure that all Existing Owners are aware of the consequences of there being no Bids at a Rate. We will educate all Existing Owners before the start of the auction regarding the effects of an All
Hold Rate. Although not obligated to do so, alternatively, we may inform all Existing Owners that an “All Hold” situation is likely, giving them sufficient time to act before the Submission Deadline established by HTS.
If HTS holds any securities for its own account on an Auction Date, it is our practice to submit a sell Order into the Auction with respect to such securities, which would prevent that Auction from being an All Hold Auction. HTS may, but is not obligated to, submit Bids for its own account in that same Auction, as set forth above.
HTS does not accept “all or nothing” Bids
We do not accept “all or nothing” Bids (i.e., Bids whereby the Bidder proposes to reject an allocation smaller than the entire quantity bid) or any other type of Bid that allows the Bidder to avoid Auction Procedures that require the pro rata allocation of securities where there are not sufficient sell Orders to fill all Bids at the Clearing Rate.
The HTS Auction Desk does not accept “market order” Bids
Current program documents for Auction Rate Securities do not provide for firm Bids to receive Auction Rate Securities at the Clearing Rate. If Potential Owners could place “market order” Bids, and all Bids in an Auction were either hold Orders or “market order” Bids, then the Clearing Rate would not be set through the Auction process. Accordingly, the only way for a Potential Owner to ensure that it receives securities is to submit a Bid that is likely to be accepted or to purchase securities after the Auction.
The HTS Auction Desk prohibits the flow of information about Order flow to the sales desk and prohibits disclosure of the Order of any Bidder to any other Bidder
We do not provide information to customers or other brokers about the number of Orders placed, the Rate at which Orders are placed, the size of the buy or hold Orders, what the Clearing Rate is likely to be or whether there are sufficient Bids to avoid a Failed Auction. However, we will advise any customer who asks of the aggregate amount of sell Orders outstanding at a given time, without Rate information.
HTS maintains documentation with respect to each Order for Auction Rate Securities in accordance with SEC Rules 17a-3 and 17a-4
HTS maintains order memorandums with respect to Orders for Auction Rate Securities which are captured in the IDEAL Auction Rate system.
HTS is not the bank designated as the Auction Agent or an affiliate of such bank
HTS does not act as an Auction Agent for nor is HTS an affiliate of such a bank.
HTS may buy or sell Auction Rate Securities outside the Auction at, above or below par as long as the purchase or sale price is a then current yield.
HTS may place bids in an auction. HTS is not required to hold securities it is awarded in an Auction. If HTS is awarded securities, it may sell these securities on the open market. Program documents allow HTS and other broker-dealers to sell Auction Rate Securities between auctions. Any bids or offers in the secondary market reflect HTS’s good faith
judgment of the current market yields. If market yields have not moved and the issuer’s credit quality has not changed since the previous auction, these prices will most likely be above or below par. HTS will no enter into an agreement with a customer, in advance, guarantying an effective yield.
Settlement periods in a secondary market will vary. HTS will agree with the counterparty on the settlement period at the time of trade in the secondary market.
HTS has an Internal Deadline for bid submissions to help ensure that it can comply with the applicable Submission Deadline
HTS must submit bids to the Auction Agent no later than the Submission Deadline. That is defined in the prospectus or offering statement for each security. That Submission Deadline can vary. HTS established an Internal Deadline in order to comply with a submission deadline. This deadline applies to all Bidders and is subject to change by us. Our current internal deadline is 11:00 AM CDT. To access our current deadline Bidders can visit or website. HTS may submit bids its own account up until the Submission Deadline.
Existing Owners and Potential Owners can change their Orders after submission to HTS prior to the HTS Internal Deadline.
Any bid to purchase or offer to sell an Auction Rate Security may be changed prior to the HTS Internal Deadline. Bidders should contact a sales representative if they wish to change their bid or offer. We may allow correction of clerical errors after the Internal Deadline and before the Submission Deadline. In these cases there must be evidence of errors in data transmission resulting from manual, mechanical or electronic failures. Some auction agents allow for correction of clerical errors after the submission deadline. Our policy allows for submission of corrections to the Auction Agent for one hour after the Submission Deadline, provided that the auction agent allows for corrections after the
The All Hold Rate is a below market rate designed to encourage Bidders to place Bids at a specified Rate.
The All Hold Rate represents a below market rate. This below market rate should encourage Retail investors to place a bid at a specified rate. However the All Hold Rate will not be significantly below market rates encouraging participation in Auctions.
HTS does not submit Owner information with their Bids.
When HTS submits a Bid on behalf of a customer, the Auction Agent treats HTS as the Owner. This process allows aggregating of Bids for (i) Bids at the same Rate by Existing Owners and (ii) Bids at the same Rate by Potential Owners.
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