40794 Federal Register / Vol. 74, No. 155 / Thursday, August 13, 2009 / Proposed Rules 

1 7 U.S.C. 24. 

2Section 101(6) of the Bankruptcy Code (11 

U.S.C. 101(6)) defines ‘‘commodity broker’’ as a 

‘‘futures commission merchant, foreign futures 

commission merchant, clearing organization, 

leverage transaction merchant, or commodity 

options dealer, as defined in section 761 of this 

title, with respect to which there is a customer, as 

defined in section 761 of this title.’’ 

3The regulations of the Commission can be found 

at 17 CFR Chapter 1. 

§ 1112.11 What Must a Third Party 

Conformity Assessment Body Do After an 

Audit? 

(a) When the accreditation body 

presents its findings to the third party 

conformity assessment body, the third 

party conformity assessment body’s 

quality manager must receive the 

findings and, if necessary, initiate 

corrective action in response to the 

findings. 

(b) The quality manager must prepare 

a resolution report identifying the 

corrective actions taken and any followup activities. If findings indicate that 

immediate corrective action is 

necessary, the quality manager must 

document that he/she notified the 

relevant parties within the third party 

conformity assessment body to take 

immediate corrective action and also 

document the action(s) taken. 

(c) If the accreditation body decides to 

reduce, suspend, or withdraw the third 

party conformity assessment body’s 

accreditation, and the reduction, 

suspension, or withdrawal of 

accreditation is relevant to the third 

party conformity assessment body’s 

activities pertaining to a CPSC 

regulation or test method, the quality 

manager must notify the CPSC. Such 

notification must be sent to the 

Assistant Executive Director, Office of 

Hazard Identification and Reduction, 

Consumer Product Safety Commission, 

4330 East West Highway, Bethesda, 

Maryland 20814, within five business 

days of the accreditation body’s 

notification to the third party 

conformity assessment body. 

(d) If the CPSC finds that the third 

party conformity assessment body no 

longer meets the conditions specified in 

CPSC Form 223 or in the relevant 

statutory provisions applicable to that 

third party conformity assessment body, 

the CPSC will notify the third party 

conformity assessment body, identify 

the condition or statutory provision that 

is no longer met, and specify a time by 

which the third party conformity 

assessment body shall notify the CPSC 

of the steps it intends to take to correct 

the deficiency and when it will 

complete such steps. The quality 

manager must document that he/she 

notified the relevant parties within the 

third party conformity assessment body 

to take corrective action and also 

document the action(s) taken. 

(e) If the third party conformity 

assessment body fails to remedy the 

deficiency in a timely fashion, the CPSC 

shall take whatever action it deems 

appropriate under the circumstances, up 

to and including withdrawing the 

CPSC’s accreditation of the third party 

conformity assessment body or the 

CPSC’s acceptance of the third party 

conformity assessment body’s 

accreditation. 

§ 1112.13 What Records Should a Third 

Party Conformity Assessment Body Retain 

Regarding an Audit? 

A third party conformity assessment 

body must retain all records relating to 

an audit and all records pertaining to 

the third party conformity assessment 

body’s resolution of or plans for 

resolving nonconformities identified 

through a reassessment by an 

accreditation body or through an 

examination by the CPSC. A third party 

conformity assessment body also must 

retain such records relating to the last 

three reassessments (or however many 

reassessments have been conducted if 

the third party conformity assessment 

body has been reassessed less than three 

times) and make such records available 

to the CPSC upon request. 

Dated: August 7, 2009. 

Todd A. Stevenson, 

Secretary. 

[FR Doc. E9–19443 Filed 8–12–09; 8:45 am] 

BILLING CODE 6355–01–P 

COMMODITY FUTURES TRADING 

COMMISSION 

17 CFR Part 190 

RIN 3038–AC82 

Account Class 

AGENCY: Commodity Futures Trading 

Commission. 

ACTION: Notice of proposed rulemaking. 

SUMMARY: The Commodity Futures 

Trading Commission (the 

‘‘Commission’’) proposes amending its 

regulations (the ‘‘Regulations’’) to create 

a sixth and separate ‘‘account class,’’ 

applicable only to the bankruptcy of a 

commodity broker that is a futures 

commission merchant (‘‘FCM’’), for 

positions in cleared over-the-counter 

(‘‘OTC’’) derivatives (and money, 

securities, and/or other property 

margining, guaranteeing, and securing 

such positions). In general, the concept 

of ‘‘account class’’ governs the manner 

in which the trustee calculates the net 

equity (i.e., claims against the estate) 

and the allowed net equity (i.e., pro rata 

share of the estate) for each customer of 

a commodity broker in bankruptcy. The 

Commission further proposes amending 

the Regulations to codify the 

appropriate allocation, in a bankruptcy 

of any commodity broker, of positions 

in commodity contracts of one account 

class (and the money, securities, and/or 

other property margining, guaranteeing, 

or securing such positions) that are 

commingled with positions in 

commodity contracts of the futures 

account class (and the money, 

securities, and/or other property 

margining, guaranteeing, or securing 

such positions), pursuant to an order 

issued by the Commission. 

DATES: Submit comments on or before 

September 14, 2009. 

ADDRESSES: You may submit comments, 

identified by RIN number, by any of the 

following methods: 

• Federal eRulemaking Portal: http:// 

www.regulations.gov. Follow the 

instructions for submitting comments. 

• Agency Web Site: http:// 

www.cftc.gov. Follow the instructions 

for submitting comments on the Web 

site. 

• E-mail: secretary@cftc.gov. Include 

the RIN number in the subject line of 

the message. 

• Fax: 202–418–5521. 

• Mail: David A. Stawick, Secretary of 

the Commission, Commodity Futures 

Trading Commission, Three Lafayette 

Centre, 1155 21st Street, NW., 

Washington, DC 20581. 

• Hand Delivery/Courier: Same as 

mail above. 

FOR FURTHER INFORMATION CONTACT: 

Robert B. Wasserman, Associate 

Director, Division of Clearing and 

Intermediary Oversight, 202–418–5092, 

rwasserman@cftc.gov; or Nancy 

Schnabel, Attorney-Advisor, Division of 

Clearing and Intermediary Oversight, 

202–418–5344, nschnabel@cftc.gov; 

Commodity Futures Trading 

Commission, Three Lafayette Centre, 

1155 21st Street, NW., Washington, DC 

20581. 

SUPPLEMENTARY INFORMATION: 

I. Net Equity 

A. Authority of Commission To Define 

‘‘Net Equity’’ and To Prescribe 

Procedures for Its Calculation 

The Commission is empowered by 

Section 20 of the Commodity Exchange 

Act (the ‘‘Act’’),1 (i) to define the ‘‘net 

equity’’ of a customer of a commodity 

broker 2 in bankruptcy, and (ii) to 

prescribe, by rule or regulation,3 the 

procedures for calculating such ‘‘net 


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4Section 761(17) of the Bankruptcy Code (11 

U.S.C. 761(17)) is one provision in Subchapter IV 

of Chapter 7 of the Bankruptcy Code (11 U.S.C. 761 

et seq.), which governs commodity broker 

liquidations (‘‘Subchapter IV’’). 

5 11 U.S.C. 761(17). 

6 7 U.S.C. 24. 

7 17 CFR 190.07(a). 

8See Proposed Rulemaking: 17 CFR Part 190 

(Bankruptcy), 46 FR 57535 (November 24, 1981). 

9 Id. at 57546. 

10 17 CFR 190.01(a). 

11 17 CFR 1.20–1.30. 

12 17 CFR 30.7. 

13As discussed in further detail below, the 

Commission has the power under Section 4d of the 

Act (7 U.S.C. 6d) to issue an order permitting 

positions in foreign futures contracts (and the 

money, securities, and/or property margining, 

guaranteeing, or securing such positions), to be 

commingled, in either an FCM or DCO account, 

with positions in futures contracts (and the money, 

securities, and/or other property margining, 

guaranteeing, or securing such positions). 

14When the Commission promulgated Regulation 

Part 190 in 1983, the Regulations had no 

requirements for the treatment of money, securities, 

and/or other property that were used to margin, 

guarantee, or secure commodity futures contracts 

traded on foreign boards of trade. In 1987, however, 

the Commission promulgated Regulation 30.7, 

which applies different and less stringent 

requirements to such money, securities, and/or 

other property than the segregation requirements in 

Regulations 1.20 through 1.30. 

15Proposing Release, supra, note 9 at 57536. 

16 Id. at 57554. 

17 17 CFR 190.08(c). 

18 17 CFR 190.07(b). 

19 17 CFR 190.07(b)(2). 

Regulation 190.07(b)(3) (17 CFR 190.07(b)(3)) 

provides a limited exception to Regulation 

190.07(b)(2), by permitting the trustee, while 

calculating net equity, to offset ‘‘[a] negative equity 

balance with respect to one customer account class’’ 

against ‘‘a positive equity balance in any other 

Continued 

equity.’’ Moreover, Section 761(17) of 

the Bankruptcy Code 4 subjects the 

definition of ‘‘net equity’’ in the case of 

a commodity broker to ‘‘such rules and 

regulations as the Commission 

promulgates under the Act.’’ 5 Section 

20 of the Act states, in pertinent part, 

that: 

Notwithstanding title 11 of the United 

States Code, the Commission may provide, 

with respect to a commodity broker that is a 

debtor under chapter 7 of title 11 of the 

United States Code, by rule or regulation— 

* * * (5) how the net equity of a customer 

is to be determined.6

The Commission has exercised its 

power under Section 20 of the Act in 

promulgating Regulation 190.07(b), 

which defines ‘‘net equity’’ as: 

[T]he total claim of a customer against the 

estate of the debtor based on the commodity 

contracts held by the debtor for or on behalf 

of such customer less any indebtedness of the 

customer to the debtor.7

In addition, the Commission has 

exercised its power under Section 20 of 

the Act in promulgating the remainder 

of Regulation 190.07 (Calculation of 

Allowed Net Equity). According to the 

proposing release for Regulation Part 

190 (the ‘‘Proposing Release’’),8 the 

Commission intended Regulation 190.07 

to constitute a ‘‘step-by-step method for 

calculating the estate’s liability to a 

customer (i.e., the customer’s net equity) 

and of the pro rata share of the assets 

available to pay that claim (i.e., the 

customer’s allowed net equity claim).’’ 9

To further such intent, the Commission 

set forth the concept of ‘‘account class’’ 

in Regulation 190.07, and defined the 

term ‘‘account class’’ in Regulation 

190.01(a). 

B. Account Class 

1. Definition 

Regulation 190.01(a) currently defines 

‘‘account class’’ as follows: 

Each of the following types of customer 

accounts which must be recognized as a 

separate class of account by the trustee: [i] 

futures accounts, [ii] foreign futures 

accounts, [iii] leverage accounts, [iv] 

commodity option accounts and [v] delivery 

accounts as defined in § 190.05(a)(2): 

Provided, however, That to the extent that the 

equity balance, as defined in § 190.07, of a 

customer in a commodity option, as defined 

in § 1.3(hh) of this chapter, may be 

commingled with the equity balance of such 

customer in any domestic commodity futures 

contract pursuant to regulations under the 

Act, the aggregate shall be treated for 

purposes of this part as being held in a 

futures account.10

2. Rationale for the Concept of Account 

Class 

In general, the Regulations apply 

different requirements to the treatment 

of positions in different types of 

commodity contracts (and to the money, 

securities, and/or other property 

margining, guaranteeing, or securing 

such positions) based on the underlying 

characteristics of those contracts. For 

example, the segregation requirements 

in Regulations 1.20 through 1.30 11

would generally apply to positions in 

commodity futures contracts that are 

traded on a designated contract market 

(i.e., futures contracts), and to the 

money, securities, and/or other property 

margining, guaranteeing, or securing 

such positions. In contrast, the 

requirements in Regulation 30.7 12

would generally apply to positions in 

commodity futures contracts that are 

traded on foreign boards of trade (i.e., 

foreign futures or foreign options 

contracts), and to the money, securities, 

and/or other property margining, 

guaranteeing, or securing such 

positions.13

Under the Regulations, requirements 

for the treatment of positions (and the 

money, securities, and/or other property 

margining, guaranteeing, or securing 

such positions) may differ in stringency, 

and therefore in the degree of protection 

that they afford customers of a 

commodity broker in bankruptcy. For 

example, the segregation requirements 

in Regulations 1.20 through 1.30 are 

more stringent than the requirements in 

Regulation 30.7.14 Thus, the 

Commission created the concept of 

‘‘account class,’’ in order to ensure that, 

in a bankruptcy of a commodity broker, 

customers that hold positions in 

commodity contracts (and deposit 

money, securities, and/or other property 

to margin, guarantee, or secure such 

positions) subject to one requirement 

would benefit from the specific 

protections afforded by such 

requirement. As the Commission stated 

in the Proposing Release: 

The reason for identifying classes of 

customer accounts is to permit the 

implementation of the principle of pro rata 

distribution so that the differing segregation 

requirements with respect to different classes 

of accounts benefit customer claimants based 

on the class of account for which they were 

imposed.15

As the Commission further stated in 

the Proposing Release: 

Obviously, much of the benefit of 

segregation would be lost if property 

segregated on behalf of a particular account 

class could be allocated to pay the claims of 

customers of a different account class for 

which less stringent segregation requirements 

were in effect.16

The Commission codified the 

aforementioned intent by promulgating 

Regulation 190.08(c), which states: 

[P]roperty held by or for the account of a 

customer, which is segregated on behalf of a 

specific account class * * * must be 

allocated to the customer estate of the 

account class for which it is segregated. 

*** 17

C. The Use of Account Class in the 

Calculation of Net Equity and Allowed 

Net Equity 

As mentioned above, the concept of 

‘‘account class’’ governs the manner in 

which the trustee calculates the net 

equity and the ‘‘allowed net equity’’ for 

each customer of a commodity broker in 

bankruptcy. 

In general, Regulation 190.07(b) 

requires a trustee to calculate net equity 

separately for each account class.18

Specifically, Regulation 190.07(b)(2) 

directs the trustee to ‘‘aggregate the 

credit and debit equity balances of all 

accounts of the same class held by a 

customer in the same capacity’’ while 

calculating net equity.19


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account class of such customer held in the same 

capacity.’’ 

20 17 CFR 190.07(a). 

21 17 CFR 190.07(c). 

22 17 CFR pt. 190, app. A, form 4. 

23 73 FR 65514 (November 4, 2008). 

24See supra notes 16 and 17, and the 

corresponding quotations from the Proposing 

Release in the text of this preamble. 

25Appendix E of Pub. L. 106–554, 114 Stat. 2763 

(2000). 

26 11 U.S.C. 761(4). 

27See Sections 2(d) and 2(e) of the Act (7 U.S.C. 

§§ 2(d), (e)). 

28 Id. 

29 11 U.S.C. 761(8). The term ‘‘registered entity’’ 

is defined in Section 1a(29) of the Act (7 U.S.C. 

§ 1a(29)) to include ‘‘(iii) a derivatives clearing 

organization registered under Section 5b * * *.’’ 

Regulation 190.07(a) states that 

‘‘allowed net equity’’ shall ‘‘be equal to 

the aggregate of the funded balances of 

such customer’s net equity claim for 

each account class plus or minus’’ 

certain adjustments.20 Regulation 

190.07(c), in turn, defines ‘‘funded 

balance’’ as: ‘‘* * * a customer’s pro 

rata share of the customer estate with 

respect to each account class available 

as of the primary liquidation date for 

distribution to customers of the same 

class.’’ 21

As this definition provides, 

Regulation 190.07(c) requires a trustee 

to calculate funded balance separately 

for each account class. Specifically, 

Regulation 190.07(c)(1) requires the 

trustee to calculate, with respect to a 

particular account class held by a 

particular customer of a commodity 

broker in bankruptcy, the ratio between 

(i) the net equity of such customer for 

such account class, and (ii) the net 

equity of all customers for such account 

class. Regulation 190.07(c)(1) then 

requires the trustee to multiply such 

ratio against the value of any money, 

securities or other property that the 

commodity broker held on behalf of 

commodity contracts in such account 

class. Finally, to calculate allowed net 

equity, Regulation 190.07(a) requires the 

trustee to aggregate the funded balances 

across account classes, and to make 

certain adjustments, thus generating the 

total amount that each customer is 

entitled to recover from all money, 

securities, and/or other property held on 

behalf of such customer. 

II. Proposed Amendments To Include 

Cleared OTC Derivatives as a Separate 

Account Class 

A. Description 

As mentioned above, Regulation 

190.01(a) currently sets forth five 

separate account classes: (i) Futures 

accounts; (ii) foreign futures accounts; 

(iii) leverage accounts; (iv) commodity 

option accounts; and (v) delivery 

accounts. The Commission is proposing 

to amend Regulation 190.01(a) to 

designate ‘‘cleared OTC derivatives’’ as 

a sixth and separate account class with 

respect to the bankruptcy of a 

commodity broker that is an FCM. The 

Commission is also proposing to make 

certain conforming changes to 

Regulation 190.07(b)(2)(viii) and Form 4 

(Proof of Claim) in Appendix A to 

Regulation Part 190 (Bankruptcy 

Forms).22 As described below, the 

Commission does not intend for 

‘‘cleared OTC derivatives’’ to constitute 

a sixth and separate account class with 

respect to a bankruptcy of a commodity 

broker that is not an FCM. 

The Commission is also proposing to 

amend Regulation 190.01 to define 

‘‘cleared OTC derivatives.’’ In its 

Interpretative Statement, dated 

September 26, 2008 (the ‘‘Statement on 

Cleared OTC Derivatives’’), the 

Commission defined ‘‘cleared-only 

contracts’’ as those contracts that 

‘‘although not executed or traded on a 

Designated Contract Market or a 

Derivatives Transaction Execution 

Facility, are subsequently submitted for 

clearing through a Futures Commission 

Merchant * * * to a Derivatives 

Clearing Organization.’’ 23 In the 

definition of ‘‘cleared OTC derivatives’’ 

in the proposed amendment to 

Regulation 190.01, the Commission is 

proposing to incorporate the definition 

for ‘‘cleared-only contracts’’ from the 

Statement on Cleared OTC Derivatives. 

However, consistent with the intentions 

specified in the Proposing Release,24 the 

Commission proposes to limit ‘‘cleared 

OTC derivatives’’ to only those 

positions in ‘‘cleared-only contracts’’ 

that (along with the money, securities, 

and/or other property margining, 

guaranteeing, or securing such 

positions) are required to have been 

(i) segregated in accordance with a rule, 

regulation, or order issued by the 

Commission, or (ii) held in a separate 

account for ‘‘cleared-only contracts’’ in 

accordance with the rules or bylaws of 

a DCO. The Commission does not 

intend to specify substantive 

requirements for the treatment of 

cleared OTC derivatives (and the 

money, securities, and/or other property 

margining, guaranteeing, or securing 

such derivatives). Rather, the 

Commission proposes to define ‘‘cleared 

OTC derivatives’’ in such a manner as 

to specify the sources from which such 

substantive requirements may originate. 

Moreover, by including contracts that 

‘‘are required to be segregated * * * or 

to be held in a separate account’’ for 

‘‘cleared-only contracts,’’ the 

Commission seeks to avoid the need to 

engage in fact-intensive post-bankruptcy 

inquiries regarding compliance with 

such requirements. 

B. Rationale 

As detailed further below, the 

Commission is proposing these 

amendments (i) to reflect the extension 

of Subchapter IV (and, in turn, 

Regulation Part 190) to cleared OTC 

derivatives under the Commodity 

Futures Modernization Act of 2000 (the 

‘‘CFMA’’),25 and (ii) to address a 

scenario that the Statement on Cleared 

OTC Derivatives did not reference. The 

Commission is proposing the 

amendments at this time because of 

increased interest among DCOs in 

clearing OTC derivatives, and the need 

to enhance certainty regarding the 

treatment of cleared OTC derivatives in 

the bankruptcy of a commodity broker 

that is an FCM. 

1. To Reflect the Extension of 

Subchapter IV to Cleared OTC 

Derivatives 

The Commission promulgated the 

current version of Regulation 190.01(a) 

in 1983. At that time, cleared OTC 

derivatives, if they existed, were not 

‘‘commodity contracts’’ within the 

meaning of Section 761(4) of the 

Bankruptcy Code.26 Therefore, neither 

Subchapter IV nor Regulation Part 190 

applied to cleared OTC derivatives. 

The CFMA, however, created the 

opportunity for OTC derivatives to be 

cleared.27 In addition, the CFMA 

extended Subchapter IV (and, in turn, 

Regulation Part 190) to cleared OTC 

derivatives. As mentioned in the 

Statement on Cleared OTC Derivatives, 

Section 761(4)(A) of the Bankruptcy 

Code defines ‘‘commodity contract,’’ 

with respect to an FCM, as a ‘‘contract 

for the purchase or sale of a commodity 

for future delivery on, or subject to the 

rules of, a contract market or board of 

trade.’’ 28 The CFMA amended the 

definition of ‘‘contract market’’ in 

Section 761(7) of the Bankruptcy Code 

to include reference to a ‘‘registered 

entity.’’ As mentioned in the Statement 

on Cleared OTC Derivatives, Section 

761(8) of the Bankruptcy Code 

incorporates by reference the definition 

of ‘‘registered entity’’ in the Act.29

Therefore, the CFMA first permitted 

cleared OTC derivatives, which are 

subject to the rules of a DCO, to become 

‘‘commodity contracts’’ within the 

meaning of Section 761(4) of the 

Bankruptcy Code, specifically with 

respect to a commodity broker that is an 

FCM. 


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30 73 FR 65514, 65515 (November 4, 2008). 

31 73 FR 65514, 65516 (November 4, 2008). 

32 7 U.S.C. 6d. 33 69 FR 69510, 69511 (November 30, 2004). 

34 Id. 

35 73 FR 65514, 65516 (November 4, 2008). 

36 5 U.S.C. 601 et seq. 

As detailed in the Statement on 

Cleared OTC Derivatives, in a 

bankruptcy of a commodity broker that 

is an FCM, claims arising out of cleared 

OTC derivatives should be included in 

the determination of net equity (and 

therefore, by inference, in the 

determination of allowed net equity), for 

purposes of Subchapter IV and 

Regulation Part 190.30 Consequently, 

the Commission is proposing 

amendments to provide a regulatory 

framework to accomplish this goal. 

2. To Address a Scenario Not 

Referenced in the Statement on Cleared 

OTC Derivatives 

In the Statement on Cleared OTC 

Derivatives, the Commission explained 

that, for purposes of Regulation Part 

190: 

A claim arising out of a cleared-only 

contract, or the property margining such a 

contract, would be includable in the futures 

account class, where, pursuant to 

Commission Order, the contract or property 

is included in an account segregated in 

accordance with Section 4d of the Act.31

However, the Commission did not 

address the treatment, under Regulation 

Part 190, of positions in cleared OTC 

derivatives (and the money, securities, 

and/or other property margining, 

guaranteeing, or securing such 

positions), in a scenario where there is 

no applicable Section 4d Order (as such 

term is defined below). Therefore, as 

mentioned above, the Commission is 

proposing amendments to create, only 

with respect to the bankruptcy of a 

commodity broker that is an FCM, a 

sixth and separate account class, to 

which cleared OTC derivatives (as well 

as the money, securities, and/or other 

property margining, guaranteeing, or 

securing such derivatives) could be 

allocated. By creating such an account 

class, the Commission is effectively 

specifying the manner in which the 

trustee in the bankruptcy of a 

commodity broker that is an FCM must 

treat, in the absence of an applicable 

Section 4d Order, claims arising out of 

cleared OTC derivatives when 

determining net equity and allowed net 

equity. 

III. Proposed Amendment To Clarify 

Appropriate Allocation of Collateral to 

Certain Account Classes 

The Commission has the power under 

Section 4d of the Act 32 to issue an order 

(a ‘‘Section 4d Order’’) permitting 

positions in commodity contracts of one 

account class (and the money, 

securities, and/or other property 

margining, guaranteeing or securing 

such positions), to be commingled with 

(and, therefore, to be accorded the same 

protections in bankruptcy as) positions 

in commodity contracts of the futures 

account class (and the money, 

securities, and/or other property 

margining, guaranteeing or securing 

such positions), in either an FCM or 

DCO account. Specifically, Section 4d of 

the Act states that: 

In accordance with such terms and 

conditions as the Commission may prescribe 

by rule, regulation, or order, * * * money, 

securities, and property of the customers of 

such futures commission merchant may be 

commingled and deposited * * * with any 

other money, securities, and property 

received by such futures commission 

merchant and required by the Commission to 

be separately accounted for and treated and 

dealt with as belonging to the customers of 

such futures commission merchant. 

The Commission has issued two 

interpretations stating that, for purposes 

of Regulation Part 190, if positions in 

commodity contracts (and relevant 

money, securities, and/or other 

property) of one account class, are, 

pursuant to a Commission order, 

commingled with positions in 

commodity contracts (and relevant 

money, securities, and/or other 

property) of the futures account class, 

then, the former positions (and relevant 

money, securities, and/or other 

property) shall be treated as part of the 

futures account class. First, the 

Commission issued an Interpretative 

Statement on October 21, 2004 (the 

‘‘Statement on Commingling Foreign 

Futures Positions’’), stating that 

‘‘collateral supporting foreign futures 

placed in domestic segregation pursuant 

to Commission Order should be treated 

as in a futures account, not a foreign 

futures account, for purposes of Part 

190.’’ 33 In the Statement on 

Commingling Foreign Futures Positions, 

the Commission indicated that it would 

accord similar treatment to positions in 

other commodity contracts (and the 

relevant money, securities, and/or other 

property) that are placed in domestic 

segregation. Specifically, the 

Commission stated that: 

In a situation whereby Commission order 

or direction, customers are required or 

allowed to contribute to a Commission 

Regulation 1.20 segregated account, those 

customers also should benefit from the 

distribution of that account proportionately 

to their contributions in the event of 

insolvency. Such claims should be treated as 

encompassed within the futures account 

class as opposed to the foreign futures 

account class or another account class.34

As mentioned above, the Commission 

subsequently issued the Statement on 

Cleared OTC Derivatives, which extends 

the conclusion in the Statement on 

Commingling Foreign Futures Positions 

to cover cleared OTC derivatives that 

have been placed in domestic 

segregation pursuant to Commission 

order. Specifically, the Commission 

stated that: 

[I]n October 2004, the Commission issued 

an interpretation regarding the appropriate 

account class for funds attributable to 

contracts traded on non-domestic boards of 

trade, and the assets margining such 

contracts, that are included in accounts 

segregated in accordance with Section 4d of 

the Act pursuant to Commission Order. In 

that context, the Commission concluded that 

the claim is properly against the Section 4d 

account class because customers whose 

assets are deposited in such an account 

pursuant to Commission Order should 

benefit from that pool of assets. The same 

rationale supports the Commission’s 

conclusion that a claim arising out of a 

cleared-only contract, or the property 

margining such a contract, would be 

includable in the futures account class, 

where, pursuant to Commission Order, the 

contract or property is included in an 

account segregated in accordance with 

Section 4d of the Act.35

The Commission is proposing to 

codify explicitly, in Regulation 

190.01(a), a generalized version of the 

Statement on Commingling Foreign 

Futures Positions and the Statement on 

Cleared OTC Derivatives. This version 

shall apply to positions in all 

commodity contracts (and money, 

securities, and/or other property 

margining, guaranteeing, or securing 

such positions). The Commission 

believes that these amendments would 

remove any concerns regarding whether 

the Statement on Commingling Foreign 

Futures Positions and the Statement on 

Cleared OTC Derivatives would be 

limited to the specific factual patterns 

addressed therein. To be clear, it is the 

belief of the Commission that the 

Statement on Commingling Foreign 

Futures Positions and the Statement on 

Cleared OTC Derivatives are 

nonetheless effective without such 

explicit codification. 

IV. Related Matters 

A. Regulatory Flexibility Act 

The Regulatory Flexibility Act 

(‘‘RFA’’) 36 requires Federal agencies, in 

promulgating regulations, to consider 

the impact of those regulations on small 


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40798 Federal Register / Vol. 74, No. 155 / Thursday, August 13, 2009 / Proposed Rules 

37 47 FR 18618 (Apr. 30, 1982). 

38 Id. at 18619. 

39 66 FR 45604, 45609 (Aug. 29, 2001). 

40 44 U.S.C. 3501 et seq. 

businesses. The amendments proposed 

herein will affect only FCMs and DCOs. 

The Commission has previously 

established certain definitions of ‘‘small 

entities’’ to be used by the Commission 

in evaluating the impact of its 

regulations on small entities in 

accordance with the RFA.37 The 

Commission has previously determined 

that FCMs 38 and DCOs 39 are not small 

entities for the purpose of the RFA. 

Accordingly, pursuant to 5 U.S.C. 

605(b), the Chairman, on behalf of the 

Commission, certifies that the 

amendments will not have a significant 

economic impact on a substantial 

number of small entities. 

B. Paperwork Reduction Act 

The Paperwork Reduction Act 

(‘‘PRA’’) 40 imposes certain 

requirements on Federal agencies in 

connection with their conducting or 

sponsoring any collection of 

information as defined by the PRA. The 

amendments do not require the new 

collection of information on the part of 

any entities subject to such 

amendments. Accordingly, for purposes 

of the PRA, the Commission certifies 

that the amendments, if promulgated in 

final form, would not impose any new 

reporting or recordkeeping 

requirements. 

C. Cost-Benefit Analysis 

Section 15(a) of the Act requires that 

the Commission, before promulgating a 

regulation under the Act or issuing an 

order, consider the costs and benefits of 

its action. By its terms, Section 15(a) of 

the Act does not require the 

Commission to quantify the costs and 

benefits of a new regulation or 

determine whether the benefits of the 

regulation outweigh its costs. Rather, 

Section 15(a) of the Act simply requires 

the Commission to ‘‘consider the costs 

and benefits’’ of its action. 

Section 15(a) of the Act further 

specifies that costs and benefits shall be 

evaluated in light of the following 

considerations: (1) Protection of market 

participants and the public; (2) 

efficiency, competitiveness, and 

financial integrity of futures markets; (3) 

price discovery; (4) sound risk 

management practices; and (5) other 

public interest considerations. 

Accordingly, the Commission could, in 

its discretion, give greater weight to any 

one of the five considerations and could 

determine that, notwithstanding its 

costs, a particular regulation was 

necessary or appropriate to protect the 

public interest or to effectuate any of the 

provisions or to accomplish any of the 

purposes of the Act. 

The Commission has evaluated the 

costs and benefits of the amendments, 

in light of the specific considerations 

identified in Section 15(a) of the Act, as 

follows: 

1. Protection of Market Participants and 

the Public 

The amendments would benefit FCMs 

and DCOs, as well as customers of the 

futures and options markets, by 

providing greater certainty (i) in a 

bankruptcy of a commodity broker that 

is an FCM, regarding the treatment of 

cleared OTC derivatives, and (ii) in a 

bankruptcy of any commodity broker, 

regarding the allocation of positions in 

commodity contracts (and relevant 

money, securities, and/or other 

property) of one account class that are 

commingled in an FCM or DCO account, 

pursuant to an order from the 

Commission, with positions in 

commodity contracts (and relevant 

money, securities, and/or other 

property) of the futures account class. 

2. Efficiency and Competition 

The amendments are not expected to 

have an effect on efficiency or 

competition. 

3. Financial Integrity of Futures Markets 

and Price Discovery 

The amendments would enhance the 

protection, in the bankruptcy of a 

commodity broker that is an FCM, of 

customers with positions in cleared 

OTC derivatives, by providing an 

account class in which to hold such 

positions (and relevant money, 

securities, and/or other property). The 

amendments would enhance certainty 

regarding the treatment, in a bankruptcy 

of any commodity broker, of customers 

with positions (and relevant money, 

securities, and/or other property) 

subject to a Section 4d Order, by 

removing concerns regarding whether 

the Statement on Commingling Foreign 

Futures Positions and the Statement on 

Cleared OTC Derivatives would be 

limited to the specific factual patterns 

addressed therein. Thus, the proposed 

regulations would contribute to the 

financial integrity of the futures and 

options markets as a whole. 

4. Sound Risk Management Practices 

The amendments would reinforce the 

sound risk management practices 

already required of FCMs and DCOs, by 

(i) providing an account class in which 

to hold positions in cleared OTC 

derivatives (and relevant money, 

securities, and/or other property), and 

(ii) providing certainty to FCMs and 

DCOs regarding the allocation between 

account classes, in a commodity broker 

bankruptcy, of customer positions (and 

relevant money, securities, and/or other 

property) subject to a Section 4d Order. 

5. Other Public Considerations 

Recent market events, including 

disruptions in global credit markets, 

render it prudent to enhance certainty 

regarding the treatment of customer 

positions (and relevant money, 

securities, and/or other property) in a 

commodity broker bankruptcy. 

Accordingly, after considering the five 

factors enumerated in the Act, the 

Commission has determined to propose 

the regulations set forth below. 

List of Subjects in 17 CFR Part 190 

Bankruptcy, Brokers, Commodity 

Futures. 

For the reasons stated in the 

preamble, the Commission proposes to 

amend 17 CFR part 190 as follows: 

PART 190—BANKRUPTCY 

1. The authority citation for part 190 

continues to read as follows: 

Authority: 7 U.S.C. 1a, 2, 4a, 6c, 6d, 6g, 7a, 

12, 19, and 24, and 11 U.S.C. 362, 546, 548, 

556, and 761–766, unless otherwise noted. 

2. In § 190.01, revise paragraph (a) 

and add paragraph (oo) to read as 

follows: 

§ 190.01 Definitions. 

* * * * * 

(a) Account class means each of the 

following types of customer accounts 

which must be recognized as a separate 

class of account by the trustee: futures 

accounts, foreign futures accounts, 

leverage accounts, commodity option 

accounts, delivery accounts as defined 

in § 190.05(a)(2), and, only with respect 

to the bankruptcy of a commodity 

broker that is a futures commission 

merchant, cleared OTC derivatives 

accounts; Provided, however, That to the 

extent that the equity balance, as 

defined in § 190.07, of a customer in a 

commodity option, as defined in 

§ 1.3(hh) of this chapter, may be 

commingled with the equity balance of 

such customer in any domestic 

commodity futures contract pursuant to 

regulations under the Act, the aggregate 

shall be treated for purposes of this part 

as being held in a futures account; 

Provided, further, that, if positions in 

commodity contracts of one account 

class (and the money, securities, and/or 

other property margining, guaranteeing, 

or securing such positions), are, 

pursuant to a Commission order, 


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Federal Register / Vol. 74, No. 155 / Thursday, August 13, 2009 / Proposed Rules 40799 

commingled with positions in 

commodity contracts of the futures 

account class (and the money, 

securities, and/or other property 

margining, guaranteeing, or securing 

such positions), then the former 

positions (and the relevant money, 

securities, and/or other property) shall 

be treated, for purposes of this part, as 

being held in an account of the futures 

account class. 

* * * * * 

(oo) Cleared OTC derivatives shall 

mean positions in commodity contracts 

that have not been entered into or 

traded on a contract market (as such 

term is defined in § 1.3(h) of this 

chapter) or on a derivatives transaction 

execution facility (within the meaning 

of Section 5a of the Act), but which 

nevertheless are submitted by a 

commodity broker that is a futures 

commission merchant (as such term is 

defined in § 1.3(p) of this chapter) for 

clearing by a clearing organization (as 

such term is defined in this section), 

along with the money, securities, and/ 

or other property margining, 

guaranteeing, or securing such 

positions, which are required to be 

segregated, in accordance with a rule, 

regulation, or order issued by the 

Commission, or which are required to 

be held in a separate account for cleared 

OTC derivatives only, in accordance 

with the rules or bylaws of a clearing 

organization (as such term is defined in 

this section). 

4. In § 190.07, revise paragraph 

(b)(2)(viii) to read as follows: 

§ 190.07 Calculation of allowed net equity. 

(b) * * * 

(2) * * * 

(viii) Subject to paragraph (b)(2)(ix) of 

this section, the futures accounts, 

leverage accounts, options accounts, 

foreign futures accounts, and cleared 

OTC derivatives accounts of the same 

person shall not be deemed to be held 

in separate capacities: Provided, 

however, That such accounts may be 

aggregated only in accordance with 

paragraph (b)(3) of this section. 

* * * * * 

5. Amend ‘‘bankruptcy appendix form 

4—proof of claim’’ in Appendix A to 

Part 190 by revising paragraph a in 

section III to read as follows: 

Appendix A to Part 190—Bankruptcy 

Forms 

* * * * * 

Bankruptcy Appendix Form 4—Proof of 

Claim 

* * * * * 

III. * * * 

a. Whether the account is a futures, foreign 

futures, leverage, option (if an option 

account, specify whether exchange-traded or 

dealer), ‘‘delivery’’ account, or, only with 

respect to a bankruptcy of a commodity 

broker that is a futures commission 

merchant, a cleared OTC derivatives account. 

A ‘‘delivery’’ account is one which contains 

only documents of title, commodities, cash, 

or other property identified to the claimant 

and deposited for the purposes of making or 

taking delivery on a commodity underlying 

a commodity contract or for payment of the 

strike price upon exercise of an option. 

* * * * * 

Issued in Washington, DC, on July 31, 

2009, by the Commission. 

David A. Stawick, 

Secretary of the Commission. 

[FR Doc. E9–18853 Filed 8–12–09; 8:45 am] 

BILLING CODE P 

DEPARTMENT OF THE INTERIOR 

[SATS No. MT–029–FOR; Docket ID: OSM– 

2008–0022] 

Office of Surface Mining Reclamation 

and Enforcement 

30 CFR Part 926 

Montana Regulatory Program 

AGENCY: Office of Surface Mining 

Reclamation and Enforcement, Interior. 

ACTION: Proposed rule; reopening and 

extension of public comment period on 

proposed amendment. 

SUMMARY: We are announcing the 

receipt of revisions pertaining to a 

previously proposed amendment to the 

Montana regulatory program 

(hereinafter, the ‘‘Montana program’’) 

under the Surface Mining Control and 

Reclamation Act of 1977 (‘‘SMCRA’’ or 

‘‘the Act’’). Montana proposes additions 

of rules and revisions to the 

Administrative Rules of Montana (ARM) 

concerning Normal Husbandry 

Practices. Montana intends to revise its 

program to improve operational 

efficiency. 

This document gives the times and 

locations that the Montana program and 

proposed amendment to that program 

are available for your inspection, the 

comment period during which you may 

submit written comments on the 

amendment, and the procedures that we 

will follow for the public hearing, if one 

is requested. 

DATES: We will accept written 

comments on this amendment until 4 

p.m., mountain daylight time September 

14, 2009. If requested, we will hold a 

public hearing on the amendment on 

September 8, 2009. We will accept 

requests to speak until 4 p.m., mountain 

daylight time, on August 28, 2009. 

ADDRESSES: You may submit comments, 

identified by ‘‘MT–029–FOR’’ or Docket 

ID number OSM–2008–0022, using any 

of the following methods: 

• Federal eRulemaking Portal: http:// 

www.regulations.gov. The proposed rule 

has been assigned Docket ID OSM– 

2008–0022. If you would like to submit 

comments via the Federal eRulemaking 

portal, go to http://www.regulations.gov 

and do the following. Click on the 

‘‘Advanced Docket Search’’ button on 

the right side of the screen. Type in the 

Docket ID ‘‘OSM–2008–0022’’ and click 

on the ‘‘Submit’’ button at the bottom of 

the page. The next screen will display 

the Docket Search Results for the rule 

making. If you click on ‘‘OSM–2008– 

0022’’, you can view the proposed rule 

and submit a comment. You can also 

view supporting material and any 

comments submitted by others. 

• Mail, Hand Delivery/Courier: Jeff 

Fleischman, Director, Casper Field 

Office, Office of Surface Mining 

Reclamation and Enforcement, Federal 

Building, 150 East B Street, Room 1018, 

Casper, WY 82601–1018, (307) 261– 

6550. Fax: (307) 261–6552. 

Instructions: All submissions received 

must include the agency name and MT– 

029–FOR. For detailed instructions on 

submitting comments and additional 

information on the rulemaking process, 

see the ‘‘Public Comment Procedures’’ 

heading of the SUPPLEMENTARY

INFORMATION section of this document. 

Docket: Access to the docket to review 

copies of the Montana program, this 

amendment, a listing of any scheduled 

public hearings, and all written 

comments received in response to this 

document, may be obtained at the 

addresses listed below during normal 

business hours, Monday through Friday, 

excluding holidays. You may receive 

one free copy of the amendment by 

contacting the Office of Surface Mining 

Reclamation and Enforcement’s (OSM’s) 

Casper Field Office. In addition, you 

may review a copy of the amendment 

during regular business hours at the 

following locations: 

Jeff Fleischman, Director, Casper Field 

Office, Office of Surface Mining 

Reclamation and Enforcement, 

Federal Building, 150 East B Street, 

Room 1018, Casper, WY 82601–1018, 

Telephone: (307) 261–6550, E-mail: 

jfleischman@osmre.gov. 

Neil Harrington, Chief, Industrial and 

Energy Minerals Bureau, Montana 

Department of Environmental Quality, 

P.O. Box 200901, Helena, MT 59620– 

0901, Telephone: (406) 444–2544, Email: neharrington@mt.gov. 


sroberts on DSKGBLS3C1PROD with PROPOSALS