›ø­a ÔÊÔÓÛ1⁄2TMÛðÎÎÁÍÛ“Œfi ‹±1⁄2 ́3a2 ̈ ÔÏ ⁄·¥ao ÔÓÒÔðÒÔÓ –ø1a Ô ±o ÔÈ

ÔÓÒÔðÒÓðÔÓ UNITED STATES DISTRICT COURT 

SOUTHERN DISTRICT OF NEW YORK 

--- -- ---X 

In re: 

MF GLOBAL INC . I 

Debtor. 

--- -- --- ------ -- --- -- -X 

KOCH SUPPLY & TRADING, LP, 

Plaintiff, 

against -

JAMES W. GIDDENS, Trustee for the 

SIPA Liquidation of MF Global Inc., 

Defendant. 

--- -- -X 

NAOMI REICE BUCHWALD 

UNITED STATES DISTRICT JUDGE 

IGsoc= soNY I DOCU!v1ENT 

11-2790 (MG) SIPA 

Adv. Pro. No. 

12 0 1 7 54 ( MG) 

MEMORANDUM AND ORDER 

12 Civ. 5596 (NRB) 

This action is a part of the highly publicized liquidation 

of MF Global Inc. ( "MFGI"), the U.S. securities broker-dealer 

and futures commission merchant 1 ("FCM") subsidiary of MF Global 

Holdings Ltd. On July 19, 2012, plaintiff Koch Supply & Trading, 

LP ("KS&T11 ), a former customer of MFGI, filed an adversary 

proceeding against James W. Giddens, the appointed trustee for 

the SIPA liquidation of MFGI (the "Trustee") , seeking a 

declaration that it is not liable to the MFGI estate for the 

value of an expired $20 million letter of credit it had obtained 

1 A futures commission merchant is a type of commodity broker that solicits or 

accepts orders to buy or sell contracts for the future delivery of 

commodities, and accepts money or assets from customers who wish to enter 

into such positions. See National Futures Association (Dec. 6, 2012), 

http://www.nfa.futures.org/nfa-registration/fcm/index.HTML. 

1 
›ø­a ÔÊÔÓÛ1⁄2TMÛðÎÎÁÍÛ“Œfi ‹±1⁄2 ́3a2 ̈ ÔÏ ⁄·¥ao ÔÓÒÔðÒÔÓ –ø1a Ó ±o ÔÈ

to margin its trading positions. In accordance with this Court's 

Amended Standing Order of Reference, dated February 1, 2012, 

that proceeding was referred to the U.S. Bankruptcy Court for 

the Southern District of New York. KS&T this motion to 

withdraw the reference to the Bankruptcy Court, pursuant to 28 

U.S.C. § 157(d). For the reasons set forth below, KS&T's motion 

is granted and the reference is withdrawn. 

BACKGROUND2 

I. Factual Background 

Prior to MFGI's liquidation, KS&T was one of its commodity 

futures customers. (Mem. of Law in Opp. to Pl. at 4.) As is 

required in the futures markets, MFGI's commodity futures 

customers posted to secure their trading positions. 

c::y1 u..Lo.Lions promulgated by the Commodities and Futures Trading 

Commission ( "CFTC") designate margin funds "customer funds" and 

re FCMs to and secure the margin funds they hold 

for their commodity futures customers. See 17 C.F.R. § 1.3(gg) 

"customer funds" to include funds deposited to margin 

2 The following facts are derived primarily from the Memorandum of Law in 

Support of Motion of Koch Supply & Trading, LP to Withdraw the Reference 

("Mem. of Law in Supp. of Pl."); Trustee's Memorandum of Law in Opposition to 

Koch Supply & Trading, LP's Motion to Withdraw the Reference ("Mem. of Law in 

Opp. to Pl."); the Declaration of Miriam L. Alinikoff in Support of Trustee's 

Memorandum of Law in Opposition to Koch Supply & Trading, LP' s Motion to 

Withdraw the Reference ("Alinikoff Decl.") and the exhibits annexed thereto; 

Reply Memorandum of Law in Support of Motion of Koch Supply & , LP to 

Withdraw the Reference ("Reply Mem. of Law in Supp. of Pl.") and the exhibits 

annexed thereto; and Declaration of Jonathan P. Guy in Support of Reply 

Memorandum of Law in Support of Motion of Koch Supply & Trading, LP's Motion 

to Withdraw the Reference ("Guy Decl.") and the exhibits annexed thereto. 

2 
›ø­a ÔÊÔÓÛ1⁄2TMÛðÎÎÁÍÛ“Œfi ‹±1⁄2 ́3a2 ̈ ÔÏ ⁄·¥ao ÔÓÒÔðÒÔÓ –ø1a Ì ±o ÔÈ

trades) ; id. at § 1. 20 (b) (requiring customer funds to 

margin trades to be and separately accounted 

Although most customers posted margin by depositing cash or 

securities with MFGI, KS&T was one of nine customers to 

margin in the form of letters of credit. (Alinikoff Decl. Ex. 

D.) At issue in the instant is a $20 million (as 

amended) irrevocable standby letter of credit (the "letter of 

credit") that KS&T obtained for MFGI' s benefit from JPMorgan 

Chase Bank, N .A. to secure its commodity trading on 

futures exchanges. (Mem. of Law in Supp. of Pl. at 2; Mem. of 

Law in Opp. to Pl. at 4.) By its terms, MFGI could only draw 

upon the letter of credit by a signed claim for 

to JPMorgan on or before its expiration date, 

by a written statement that KS&T was in breach of, 

or failed to pay amounts due in accordance with, the terms of 

its customer agreement with MFGI. inikoff Decl. Ex. D., at 

1.) The letter of credit expired on December 31, 

months after the filing date of MFGI's 1 ion. 

The ies do not dispute that, as of its 

2011, two 

Id. at 3.) 

neither MFGI nor the Trustee had drawn upon the letter of 

credit. 

On October 31, 2011, MF Global and its finance subs 

MF Global Finance USA Inc., filed voluntary petitions for relief 

3 
›ø­a ÔÊÔÓÛ1⁄2TMÛðÎÎÁÍÛ“Œfi ‹±1⁄2 ́3a2 ̈ ÔÏ ⁄·¥ao ÔÓÒÔðÒÔÓ –ø1a Ï ±o ÔÈ

under Chapter 11 of the U.S. Bankruptcy Code. (Reply Mem. of Law 

in Supp. of Pet. Ex. 1, at 2.) The same day, the Securities 

Investor Protection Corporation (the "SIPC") commenced a 

proceeding to liquidate MFGI under SI in the U.S. District 

Court for the Southern District of New York. Id. The Hon. Paul 

A. Engel mayer entered an order therein granting SIPC's 

application, appointing defendant James W. Giddens the SIPA 

Trustee for the liquidation of MFGI's business, and removing the 

case to the U.S. Bankruptcy Court for the Southern District of 

New York (the "Bankruptcy Court") , to 15 u.s.c. 

§ 78eee (b) (4). See Order, Securities Investor Protection 

~--~--~~~~~~~ 

v. MF Global Inc., Case No. 11 7750 (PAE) (S.D.N.Y. Oct. 31, 

2011), Alinikoff Decl. Ex. B; Mem. of Law in Opp. to Pet. at 3.) 

On November 23, 2011, the Bankruptcy Court entered an Order 

approving the Trustee's application to establish a claims 

process by which MFGI' s customers could apply to receive a pro 

rata portion of any customer held by MFGI as of the 

fil date. See Order, In re MF Global Inc., No. 11-2790 (MG) 

SIPA (Bankr. S.D. Nov. 23, 2011), Dkt. No. 423, Alinikoff Decl. 

Ex. I. The Order established, inter alia, a bar date of January 

31, 2012 (the "bar date") by which customers were required to 

file claims to their share of MFGI' s customer property. Id. 

3 As a securities broker-dealer, MFGI was subject to regulation by 

the Securities and Exchange Commission ("SEC"), as well as the Security 

Protection Investor Act ( "SIPA") . 

4 
›ø­a ÔÊÔÓÛ1⁄2TMÛðÎÎÁÍÛ“Œfi ‹±1⁄2 ́3a2 ̈ ÔÏ ⁄·¥ao ÔÓÒÔðÒÔÓ –ø1a Î ±o ÔÈ

Because neither MFGI nor the Trustee had presented or drawn upon 

KS&T' s letter of credit as of its expiration date, and since 

KS&T' s January 31, 2012 account statements from MFGI indicated 

it had no property or positive trade equity in s customer 

accounts for trading on foreign exchanges, KS&T did not believe 

it had reason to file a commodity futures customer claim before 

the bar date. 4 (Mem. of Law in Supp. of Pet. at 2; see Addendum 

to Commodity Futures Customer Claim of KS&T, Alinikoff Decl. Ex. 

F, at 2.) 

The instant dispute stems from the Trustee's subsequent 

determination that KS&T had a liability to the MFGI estate in 

connection with the expired letter of credit. Specifically, on 

March 1, 2012, the Trustee advised KS&T for the first time that 

he believed the letter of credit was "customer property," as 

that term is defined for purposes of FCM liquidation under 17 

C.F.R. § 190.08(a){l)(i)(E), and thus the expiration of the 

letter of credit effected an unauthorized post-filing date 

transfer of customer property to KS&T, avoidable by the Trustee 

4 Indeed, as counsel for KS&T informed the Court at oral argument, KS&T 

instructed MFGI to transfer its trading positions to another FCM one full 

year before the bar date, and much of that transfer had occurred by October 

31, 2011. Tr. of Oral Arg. at 2:23 3:15, 3:24-4:3, 

No. 12 Civ. 5596 (S.D.N.Y. Nov. 20, 2012 

instructions from KS&T to complete the transfer to the 

fi date, MFGI did not finalize the transfer until November 1, 2011. 

at 3:10-15. Thus, but for MFGI's failure to timely process its request, KS&T 

would have had no open positions whatsoever with MFGI as of the filing date. 

5 
›ø­a ÔÊÔÓÛ1⁄2TMÛðÎÎÁÍÛ“Œfi ‹±1⁄2 ́3a2 ̈ ÔÏ ⁄·¥ao ÔÓÒÔðÒÔÓ –ø1a Í ±o ÔÈ

pursuant to 11 U.S.C. §§ 549 and 764. (Addendum to Commodity 

Futures Customer Claim of KS&T, Alinikoff Decl. Ex. F, at 3.) 

As a result, KS&T filed a ive" customer claim with 

the Trustee on April 5, 2012, in order to preserve its s to 

receive a pro rata share of customer property in the SIPA 

liquidation, should the Trustee recover any property on account 

of the letter of credit. (Mem. of Law in Supp. of Pet. at 3 

n.1.) KS&T further contested the Trustee, s theory by attaching 

an addendum to its customer claim, refut any liability to the 

MFGI estate for the value of the expired letter of credit. See 

Addendum to Commodity Futures Customer Claim of KS&T, Alinikoff 

Decl. Ex. F, at 2.) 

The Trustee issued his notice of determination of KS&T' s 

customer claim on June 22, 2012. (See Alinikoff Decl. Ex. G.) 

Because KS&T filed its "protective" claim after the bar date of 

January 31, 2012, the Trustee summarily denied its claim to any 

pro rata share of MFGI,s customer property as untimely. Id. at 

1.) He also affirmed his earlier determination that the letter 

of credit constituted "customer property," ect to ratable 

distribution in the liquidation proceeding under 11 U.S. C. § 

766 (h) , and thus found KS&T liable to the MFGI estate in the 

amount of $20 million. (Id. at 2.) 

6 
›ø­a ÔÊÔÓÛ1⁄2TMÛðÎÎÁÍÛ“Œfi ‹±1⁄2 ́3a2 ̈ ÔÏ ⁄·¥ao ÔÓÒÔðÒÔÓ –ø1a È ±o ÔÈ

II. Procedural Background 

On 19, 2012, KS&T commenced an adversary proceeding 

against the Trustee, seeking a decl judgment that it does 

not have any liability to the MFGI estate in connection with the 

expired letter of credit. See Complaint for Declaratory 

Judgment, No. 11 2790 (MG) SIPA (Bankr. S.D. July 19, 2012), 

Alinikoff Decl. Ex. J.) In accordance with this Court's Amended 

Standing Order of Reference, dated 1, 2012, that 

proceeding was automatically referred to the Bankruptcy Court 

for determination in conjunction with the SIPA liquidation 

proceeding. See 

12 Misc. 0032 (S.D.N.Y. Feb. 1, 2012). On July 20, 2012, KS&T 

filed the instant motion to withdraw the reference of the 

adversary proceeding to the Bankruptcy Court, to 28 

u.s.c. § 157(d). 

DISCUSSION 

Notwithstanding this Court's standing order for automatic 

reference of liquidation-related cases to the Bankruptcy Court, 

the district court is authorized to withdraw the reference, in 

whole or in part, in appropriate circumstances. See 28 U.S.C. § 

157 (d) (2005). In particular, § 157 (d) sets forth two bases for 

withdrawal of the reference. First, the statute provides for 

withdrawal where the proceeding requires 

7 
›ø­a ÔÊÔÓÛ1⁄2TMÛðÎÎÁÍÛ“Œfi ‹±1⁄2 ́3a2 ̈ ÔÏ ⁄·¥ao ÔÓÒÔðÒÔÓ –ø1a Ë ±o ÔÈ

consideration of non-bankruptcy federal laws that regulate 

interstate commerce. Id. The statute provides an additional, 

permissive basis for withdrawal of the reference for "cause 

shown." Id. KS&T moves for withdrawal of the reference under 

both 

I. Mandatory Withdrawal 

1. Legal Standard 

Section 157(d) mandates withdrawal of the reference if the 

district court determines that "resolution of the proceeding 

requires consideration of both title 11 and other laws of the 

United States regulating organizations or activities affecting 

interstate commerce." Id. The Second Circuit construes this 

provision requiring withdrawal of the reference only 

where "substantial and material consideration of non-Bankruptcy 

Code federal [law] is necessary for the resolution of the 

Cir. 1990) 

A requires "substantial and material 

consideration" of non-bankruptcy federal laws when the court 

must engage in "s ficant interpretation, as opposed to s 

application," of those laws. See Picard v. Flinn 

LLC, 463 B.R. 280 (S.D.N.Y. 2011); In re Gaston & Snow, 173 B.R. 

302 (S.D.N.Y. 1994). Withdrawal of the reference in that case is 

8 
›ø­a ÔÊÔÓÛ1⁄2TMÛðÎÎÁÍÛ“Œfi ‹±1⁄2 ́3a2 ̈ ÔÏ ⁄·¥ao ÔÓÒÔðÒÔÓ –ø1a Á ±o ÔÈ

mandatory, ess of whether the bankruptcy j is 

familiar with the non-bankruptcy federal law. See Picard v. 

Chase & Co., 454 B.R. 307, 316 (S.D.N.Y. 2011). 

Furthermore, "the burden of establishing a right to mandatory 

withdrawal is more easily met" where matters of first impression 

are concerned. See Bear Sterns Sees. v. Gredd, No. 01 Civ. 

4379, 2001 WL 840187 1 at *2 (S.D.N.Y. July 25 1 2001); Mishkin v. 

lofC 220 B.R. 784 1 786 (S.D.N.Y. 1998). 

2. Analysis 

In order to conclude that withdrawal of the reference is 

we must find that KS&T 1 S adversary proceeding 

necessitates significant interpretation of a non-bankruptcy 

federal law. The other law primari at issue here is 17 C.F.R. 

190.08 (a) (i) (1) (E) 1 a CFTC regulation that defines "customer 

property" for purposes of FCM l 

proceeds of a letter of credit" 

to include the "full 

or held to margin a 

commodity contract. See 17 C.F.R. 190.08(a) (i) (1) (E) 

{ "Regulation 19 0 . 0 8 (a) ( i ) ( 1) (E) " ) . 

(2012) 

KS&T argues primari that resolution of its 

proceeding requires ion of Regulation 

190.08(a) (i) (1) (E) I which it submits is a non-bankruptcy federal 

law, and may require as well examination of the CFTC 

to the at ion. (Mem. of Law in Supp. of Pl. at 6.) In 

9 
›ø­a ÔÊÔÓÛ1⁄2TMÛðÎÎÁÍÛ“Œfi ‹±1⁄2 ́3a2 ̈ ÔÏ ⁄·¥ao ÔÓÒÔðÒÔÓ –ø1a Ôð ±o ÔÈ

response, the Trustee contends that Regulation 

190.08 (a) (i) (1) (E) is not an "other" law because it was intended 

to implement the ~v·~'·"sions of the Bankruptcy Code, and thus it 

is "effectively" of title 11. (Mem. of Law in to Pl. 

at 10.) The Trustee further argues that, even if we conclude 

that Regulation 190.08 (a) (i) (1) (E) is a non-bankruptcy law, 

resolution of KS&T' s proceeding would not require substantial 

and material consideration of it because a st forward 

application of its ain language compels a decision 

the Trustee. (Mem. of Law in Opp. to Pl. at 7.) 

The Trustee's arguments in opposition to KS&T's motion are 

flawed in a number of respects. First, his assertion that 

Regulation 190.08 (a) (i) (1) (E) does nothing more than 

the sions of title 11 is unsupportable. Notably, although 

title 11 contains a definition of "customer property," see 11 

u.s.c. § 761 (10) 1 the Commodity Exchange Act (the "CEA") 

authorizes the CFTC to add to, or subtract that definition 

when promulgating regulations to govern FCM liquidations. See 7 

U.S.C. § 24(a) (1) (2012) ("Notwithstanding title 11, the [CFTC] 

may provide by rule or ion . . that certain cash, 

securities, other property, or commodity contracts are to be 

included in or excluded from customer property.") . Thus, when 

the CFTC enacted Regulation 190.08 to specifically define 

10 
›ø­a ÔÊÔÓÛ1⁄2TMÛðÎÎÁÍÛ“Œfi ‹±1⁄2 ́3a2 ̈ ÔÏ ⁄·¥ao ÔÓÒÔðÒÔÓ –ø1a ÔÔ ±o ÔÈ

"customer property" for purposes of FCM liquidation, it did so 

pursuant to the CEA, a non-bankruptcy federal statute. See 7 

U.S.C. § 24(a). In fact, the CFTC interprets the CEA's of 

authority "[n] otwithstanding title 11" to mean it is in no way 

constrained by the boundaries of title 11 when promulgat such 

regulations. See Tr. at 33:12 16, 33:23-34:3. For these reasons, 

it is clear that Regulation 190.08 (a) (i) (1) (E) is a nonbankruptcy federal regulation enacted pursuant to title 7, and 

therefore constitutes an "other law" for purposes of § 157(d). 

Moreover, KS&T's proceeding necessitates 

interpretation of a portion of ion 19 0 . 0 8 (a) ( i) ( 1) (E) 

that is not redundant, nor derivative of title 11's definition 

of "customer property." Indeed, the definitions are different. 

Section 761(10) of title 11 defines "customer property" to 

include "cash, a security, or other property, or proceeds of 

such cash, security, or property, received, acquired, or held by 

or for the account of the debtor including . property 

received, acquired, or held to guarantee, secure, 

or sell a commodity contract." 11 u.s.c. 

§ 761 (10) (A) (i) By contrast, ion 190.08 (a) (i) (1) (E) 

provides: 

Customer property includes (i) All cash, securities, 

or other property or the proceeds of such cash, securities, 

or other received, acquired, or held by or for the 

account of the debtor which is: (E) The full 

11 
›ø­a ÔÊÔÓÛ1⁄2TMÛðÎÎÁÍÛ“Œfi ‹±1⁄2 ́3a2 ̈ ÔÏ ⁄·¥ao ÔÓÒÔðÒÔÓ –ø1a ÔÓ ±o ÔÈ

proceeds of a letter of credit if such letter of credit was 

received, acquired or held to margin, guarantee, secure, 

purchase or sell a commodity contract. 

17 C.P.R.§ 190.08(a)(i)(1)(E). To support his argument that the 

expiration of the $20 million letter of credit is an avoidable 

transfer, the Trustee relies specifically on the phrase "full 

proceeds of a letter of credit," which appears nowhere in title 

11. (See Mem. of Law in Opp. to Pl. at 7.) As a result, the 

reviewing court cannot merely interpret the definition of 

"customer property" as it appears in 11 U.S.C. § 761(10) in 

order to determine whether the Trustee can prevail. That 

conclusion is further supported by the Trustee's concession at 

oral argument that he could not maintain his determination of 

KS&T' s liability without the language that appears exclusively 

in Regulation 190.08 (a) (i) (1) (E). See Tr. at 25:15-18 ("If every 

other regulatory scheme and statute were in effect except for 

the 190 regulations enacted by the CFTC, I would concede that we 

would not be able to do what we are attempting to do here."). 

Second, the Trustee's argument that straightforward 

application of Regulation 190.08 (a) (i) (1) (E)'s "plain language" 

supports his determination of KS&T's liability is overly 

simplistic. (See Mem. of Law in Opp. to Pl. at 7.) At a minimum, 

the reviewing court will have to determine whether the phrase 

"full proceeds" encompasses the face value of the letter of 

12 
›ø­a ÔÊÔÓÛ1⁄2TMÛðÎÎÁÍÛ“Œfi ‹±1⁄2 ́3a2 ̈ ÔÏ ⁄·¥ao ÔÓÒÔðÒÔÓ –ø1a ÔÌ ±o ÔÈ

credit, a fact evidenced by the Trustee's heavy reliance on the 

CFTC Commentary to support his determination. (See id. at 9 

(cit CFTC Commentary to the Part 190 Regulations, 48 Fed. 

Reg. 4816 (Mar. 1, 1983)) Regardless of CFTC intent, the 

regulation speaks only in terms of "full proceeds," and not 

"face value." As a result, more than a s e and 

straightforward application of the language of Regulation 

190.08 (a) (i) (1) (E) would be required for the Trustee to 1. 

Another issue the reviewing court will have to resolve is 

whether the regulation puts customers on sufficient notice that 

the face value of a standby letter of credit held to a 

commodity contract could be designated customer As 

counsel for the CFTC admits, "proceeds" has a "usual" meaning: 

"something that results or accrues; the total amount derived 

from a sale or other transaction." See CFTC Br. in Supp. of the 

Trustee's Mot. for Summ. J. at 9, In re MF Global Inc., No. 11 

2790 (MG) SIPA, Adv. Pro. No. 12-1754 (Bankr. S.D. Nov. 16, 

2012), Dkt. No. 40. The CFTC interprets the requisite 

"transaction" here to be the post of the letter of credit as 

margin. See Tr. at 49:18-50:2. However, a customer who has not 

read the CFTC Commentary to Regulation 190.08 (a) (i) (1) (E) may 

not understand that the CFTC intended "full to mean 

13 
›ø­a ÔÊÔÓÛ1⁄2TMÛðÎÎÁÍÛ“Œfi ‹±1⁄2 ́3a2 ̈ ÔÏ ⁄·¥ao ÔÓÒÔðÒÔÓ –ø1a ÔÏ ±o ÔÈ

"face value" merely because a standby letter of credit, undrawn 

and undefaulted, was as margin. 

Furthermore, assuming the regulation encompasses the face 

value of the letter of credit, the reviewing court will have to 

determine whether the Trustee's interpretation of Regulation 

190.08 (a) (i) (1) (E) would permit him to collect $20 million from 

KS&T directly. This may necessitate interpretation of the CFTC 

Commentary, which requires the Trustee to "draw the full value 

of a letter of credit posted as margin and treat the funds 

received as customer property, 

Fed. Reg. at 8718. As it is unclear from the CFTC Commentary how 

the Trustee could "draw" on an red, undefaul ted letter of 

credit, a third question for the 

whether the Commentary even 

court to consider is 

~~·ut-~'"~~ates expired letters of 

credit. The Trustee argues little more than that, "once a 

liquidation occurs, the Bankruptcy Code's distribution scheme 

predominates." See Mem. of Law in Opp. to Pet. at 8.) We simply 

cannot conclude that the logistical ion of such a 

"distribution scheme" constitutes a forward application 

of Regulation 190.08 (a) (i) (1) (E). 

Thus, KS&T' s proceeding s at least three 

novel issues of non bankruptcy statutory ion with 

which a reviewing court will have to contend: first, whether the 

14 
›ø­a ÔÊÔÓÛ1⁄2TMÛðÎÎÁÍÛ“Œfi ‹±1⁄2 ́3a2 ̈ ÔÏ ⁄·¥ao ÔÓÒÔðÒÔÓ –ø1a ÔÎ ±o ÔÈ

meaning "full proceeds" in Regulation 190.08 (a) (i) (1) (E) 

encompasses the face value of an otherwise undefaulted standby 

letter of credit; second, whether regulation provides 

sufficient notice to commodity futures customers that the face 

value of such letters of credit could be designated customer 

property; and third, whether the CFTC Commentary to the 

regulation contemplates the avoidability of an expired letter of 

credit. 

We note that KS&T further argues that it is entitled to 

mandatory withdrawal because its adversary proceeding requires 

determination of ( 1) whether Regulation 190.08 (a) (i) (1) (E) 

conflicts with the CEA's prohibition on the CFTC's regulation of 

bank products; and (2) whether the CFTC's interpretation of 

Regulation 190.08 (a) (i) (1) (E) exceeds its rulemaking authority 

under the CEA. See Mem. of Law in Supp. of Pl. at 6-7.) 

However, our analysis above renders it unnecessary to examine 

whether those issues require significant interpretation of 

"other laws" of the United States. Having determined that the 

resolution of KS&T's adversary proceeding will necessitate 

s ficant interpretation of 17 C.F.R 190.08(a)(i)(1)(E), a 

non-bankruptcy federal law that regulates interstate commerce, 

we hereby withdraw the reference of KS&T's adversary proceeding 

to the Bankruptcy Court, pursuant to§ 157(d). 

15 
›ø­a ÔÊÔÓÛ1⁄2TMÛðÎÎÁÍÛ“Œfi ‹±1⁄2 ́3a2 ̈ ÔÏ ⁄·¥ao ÔÓÒÔðÒÔÓ –ø1a ÔÍ ±o ÔÈ

II. Permissive Withdrawal 

Since we withdraw the reference from the Bankruptcy Court 

under the mandatory withdrawal provision of § 157 (d), lS 

no need to determine whether KS&T is tled to permissive 

withdrawal for cause shown. 

CONCLUSION 

For the aforementioned reasons, KS&T' s motion to withdraw 

the reference from the U.S. Bankruptcy Court for the Southern 

District of New York is granted and the reference is hereby 

withdrawn. 

SO ORDERED. 

DATED: New York, New York 

December 10, 2012 

NAOMI 

L-e/k~ REICE BUCHWALD 

UNITED STATES DISTRICT JUDGE 

Copies of the foregoing Order have been mailed on this date 

to the following: 

Jonathan P. Guy, Esq. 

James W. Burke, Esq. 

Orrick, Herrington & Sutcliffe LLP 

Columbia Center 

1152 15th Street, N.W. 

Washington, D.C. 20005 

16 
›ø­a ÔÊÔÓÛ1⁄2TMÛðÎÎÁÍÛ“Œfi ‹±1⁄2 ́3a2 ̈ ÔÏ ⁄·¥ao ÔÓÒÔðÒÔÓ –ø1a ÔÈ ±o ÔÈ

Kenneth E. Lee, Esq. 

Miriam L. Alinikoff, Esq. 

Levine Lee LLP 

570 Lexington Avenue, 7th Floor 

New York, NY 10022 

Robert A. Schwartz, Esq. 

U.S. Commodity Futures Trading Commission 

Three Lafayette Plaza 

1155 21st Street, N.W. 

Washington, D.C. 20581 

17