The Commodity Futures Trading Commission has amended its bankruptcy rules (17 C.F.R. Part 190) to create a new “account class” for cleared over-the-counter (OTC) derivatives for purposes of calculating customer “net equity” and “allowed net equity” in the event of the bankruptcy of a futures commission merchant. The “cleared OTC derivatives” account class would include only those positions, and associated collateral, that are required to be (1) segregated or set aside in accordance with a rule, regulation or order issued by the CFTC, or (2) held in a separate account for cleared OTC contracts in accordance with the rules or bylaws of a derivatives clearing organization (DCO). The amended rules further provide that, to the extent the CFTC, pursuant to an order issued under section 4d of the Commodity Exchange Act, permits certain cleared OTC derivatives to be held in a customer segregated account, the positions will be treated as futures for purposes of calculating customer net equity. In this regard, the CFTC stated that it would continue to consider petitions for such orders and approve such petitions in appropriate cases.
The new rules do not impose substantive requirements with respect to the treatment of cleared OTC derivative positions and associated collateral. However, the CFTC has directed its staff to draft rules that would impose such substantive requirements.
The CFTC release containing the final rules is available here.