The Commodity Futures Trading Commission has approved for publication a proposal to create a sixth and separate account class for OTC derivatives.
The Commodity Futures Trading Commission has approved for publication a proposal to create a sixth and separate account class for OTC derivatives.
The new class would include derivatives that a futures commission merchant (FCM) carries for a customer and submits for clearing through a derivatives clearing organisation.
The creation of this class would permit the extension of certain protections in bankruptcy to (i) the positions that customers of an FCM hold in cleared OTC derivatives, and (ii) the collateral that such customers deposit to secure such positions, in the event that the CFTC has not issued an order permitting the positions and collateral pertaining to such account class to be commingled with positions and collateral relating to the domestic futures account class.
Additionally, the proposal codifies the appropriate allocation of positions and collateral during bankruptcy, in the event that the CFTC does issue an order permitting the commingling of (i) positions and collateral relating to commodity contracts of one account class with (ii) positions and collateral relating to commodity contracts of the domestic futures account class.
The CFTC is seeking public comment on the proposal. The comment file will remain open for 30 days following publication in the Federal Register.
