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CFTC creates separate account class for cleared OTC derivatives

CFTC creates separate account class for cleared OTC derivatives


The Commodity Futures Trading Commission has approved final rules that create a sixth and separate account class, applicable in the event of futures commission merchant bankruptcy, for cleared OTC derivatives.

The rules aim to enhance certainty regarding protections under the Bankruptcy Code and CFTC regulation Part 190 with respect to over-the-counter derivatives that customers clear through a futures commission merchant on or subject to the rules of a derivatives clearing organisation registered with the CFTC. 

The 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 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.

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