Protection of Cleared Swaps Customer Contracts and Collateral; Conforming Amendments to the Commodity Broker Bankruptcy Provisions (Final Rule)

77 FR XXXX

The CFTC is adopting regulations pertaining to the protection of cleared swap customer contracts and related collateral. Specifically, the regulations impose requirements on FCMs and DCOs) regarding the treatment of cleared swaps customer contracts (and related collateral), and make conforming amendments to bankruptcy provisions applicable to commodity brokers under the CEA. Significantly, the CFTC rules adopted a model entitled the "Legally Segregated Operationally Commingled Model" or the "Complete Legal Segregation Model" that allows the collateral of all of an FCM's cleared swaps customers to be kept together on an omnibus basis pre-bankruptcy, but is attributed to each customer's swaps positions. Further, in the event of a default by both a clearing member FCM and one or more of the clearing member's cleared swaps customers, a DCO would have to access the collateral of the defaulting cleared swaps customers, but not the collateral of the non-defaulting cleared swaps customers.

Cross References: Dodd-Frank Section 724; Bankruptcy Code Section 761(4)(F); 17 CFR Parts 22 190; Lofchie's Guide to CPO/CTA Regulation: Chapter 12, Insolvency.