CFTC creates separate account class for customer positions in cleared OTC derivatives

The CFTC approved final rules that aim to enhance certainty regarding protections under the Bankruptcy Code and CFTC regulation Part 190 with respect to OTC derivatives (and related collateral) that customers clear through a futures commission merchant on or subject to the rules of a derivatives clearing organization registered with the CFTC (cleared OTC derivatives). The Final Rules enhance certainty regarding such protections by creating a sixth and separate account class, applicable in the event of FCM bankruptcy, for cleared OTC derivatives.

Additionally, the Final Rules codify the appropriate allocation between account classes of positions (and collateral), in the event of commodity broker bankruptcy, where cleared OTC derivatives are subject to a CFTC order under Section 4d of the Commodity Exchange Act.

About The Author

Felix Shipkevich

Felix Shipkevich is a Manhattan-based attorney and general counsel for Shipkevich Law Firm. He has extensive experience working with the CFTC and NFA on registration, compliance, and enforcement issues for CPOs, CTAs, FCMs, IBs, and RFEDs. Felix also practices intellectual property and corporate governance law.