How It Works: Auction Conclusion

Notification of Auction End

At the OpenBook^® auction close, participants will be notified of the clearing spread and the quantity of bonds, if any, that they have been awarded. Subsequently, investors will be notified of the final pricing terms.

1. Award of Bonds
   At the end of an OpenBook^® auction, orders are filled working from the lowest-spread bids (including market bids) up to the spread that sells out the entire offering. Those who bid below the clearing spread have their orders filled at the clearing spread. Bids at the clearing spread are awarded bonds in Time Stamp order. Those who bid above the clearing spread are not awarded bonds. In the event of ties on both spread and Time Stamp, bonds are awarded pro rata.

2. Notification of Successful Bidders
   Successful bidders will be notified electronically on the award screen on the OpenBook auctions Web site. Information about the auctioned bond (e.g., size, yield, coupon, maturity) will be publicly available at the OpenBook auctions Web site after the conclusion of an auction.

3. Pricing
   Bond pricing occurs approximately 30 minutes after an auction closes. The auction clearing spread is added to the benchmark Treasury rate to determine the yield of the bonds offered. The coupon rate on the bonds will be set by the underwriters at pricing. The bond price that corresponds to the auction yield and coupon rate is calculated to three decimal places. Bonds will be free to trade shortly after pricing.

4. Treasury Sale
   Institutional investors may sell Treasuries at the conclusion of an auction through WR Hambrecht + Co and its joint managers. In most cases, investors may set and change the amount of the benchmark Treasury bonds they wish to sell in the 20 minutes after an auction ends. The sale will be made at the prevailing market price at the time the deal prices.

5. Soft Dollars
   A portion of the selling concession on each deal may be available on a soft dollar basis to investors. Investors will have up to 24 hours after a deal prices to complete their soft dollar designations.

6. Auction Cancellation
   If the benchmark Treasury bond yield increases beyond a pre-specified yield at pricing, the issuer may, at its discretion, cancel the auction. If there are not sufficient orders to fill the final deal size announced by the issuer, the auction also may be cancelled.