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[CODE]

COMMODITY FUTURES TRADING COMMISSION

17 CFR Part 190

RIN 3038-AE67

Part 190 Bankruptcy Regulations

AGENCY: Commodity Futures Trading Commission.

ACTION: Supplemental notice of proposed rulemaking.

SUMMARY: In April of 2020, the Commodity Futures Trading Commission (the 

“Commission”) proposed amendments to its part 190 regulations governing bankruptcy 

proceedings of commodity brokers. In light of comments on the proposed amendments, the 

Commission is proposing a revision of the proposed amendments with respect to a particular 

issue, specifically, efforts to foster a resolution proceeding under Title II of the Dodd-Frank Act.

DATES: Comments must be received on or before [INSERT DATE 30 DAYS AFTER 

DATE OF PUBLICATION IN THE FEDERAL REGISTER].

ADDRESSES: You may submit comments, identified by “Part 190 Bankruptcy Regulations” 

and RIN number 3038-AE67, by any of the following methods:

• CFTC Comments Portal: https://comments.cftc.gov. Select the “Submit Comments” link 

for this rulemaking and follow the instructions on the Public Comment Form.

• Mail: Send to Christopher Kirkpatrick, Secretary of the Commission, Commodity 

Futures Trading Commission, Three Lafayette Centre, 1155 21st Street, NW, 

Washington, DC 20581.

• Hand Delivery/Courier: Follow the same instructions as for Mail, above.
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Please submit your comments using only one of these methods. To avoid possible delays 

with mail or in-person deliveries, submissions through the CFTC Comments Portal are 

encouraged.

All comments must be submitted in English, or if not, accompanied by an English 

translation. Comments will be posted as received to https://comments.cftc.gov. You should 

submit only information that you wish to make available publicly. If you wish the Commission 

to consider information that you believe is exempt from disclosure under the Freedom of 

Information Act (FOIA), a petition for confidential treatment of the exempt information may be 

submitted according to the procedures established in § 145.9 of the Commission’s regulations.1

The Commission reserves the right, but shall have no obligation, to review, pre-screen, 

filter, redact, refuse or remove any or all of your submission from https://comments.cftc.gov that 

it may deem to be inappropriate for publication, such as obscene language. All submissions that 

have been redacted or removed that contain comments on the merits of the rulemaking will be 

retained in the public comment file and will be considered as required under the Administrative 

Procedure Act and other applicable laws, and may be accessible under the FOIA.

FOR FURTHER INFORMATION CONTACT: Robert B. Wasserman, Chief Counsel and 

Senior Advisor, 202-418-5092, rwasserman@cftc.gov, Commodity Futures Trading 

Commission, Three Lafayette Centre, 1155 21st Street, NW, Washington, DC 20581. 

 1 17 CFR 145.9. Commission regulations referred to in this release are found at 17 CFR chapter I (2019), and are 

accessible on the Commission’s website at 

https://www.cftc.gov/LawRegulation/CommodityExchangeAct/index.htm.
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Introduction

In April 2020, the Commission approved a proposal to update comprehensively its 

commodity broker bankruptcy rules, 17 CFR Part 190 (the “Proposal”).

2

 Subpart C of those 

proposed rules is intended to establish a bespoke set of rules for the bankruptcy of a derivatives 

clearing organization (“DCO”). Within Subpart C, §190.14 addresses operation of the estate of 

the debtor clearing organization subsequent to the order for relief. Proposed §190.14(b)(1) states 

that, “except as otherwise explicitly provided” in paragraph (b), the DCO “shall cease making 

calls for variation or initial margin.”

That alternative provision is found in proposed §190.14(b)(2) and (3), and was intended

to provide a brief opportunity, after the order for relief, to enable paths alternative to liquidation 

– that is, resolution under Title II of the Dodd-Frank Wall Street Reform and Consumer 

Protection Act3 (“Title II Resolution”), or transfer of clearing operations to another DCO – in 

cases where a short delay (i.e., less than or equal to six days) might facilitate such an alternative

path.

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 The aim of proposed §190.14(b)(2) and (3) was to avoid a DCO’s bankruptcy filing 

having an irrevocable consequence of termination of clearing operations, an event that would 

likely be disruptive of markets and possibly the broader United States financial system, in a case 

where an alternative path was close to fruition. Proposed §190.14(b)(2) and (3) applied to all 

DCOs, and was intended to foster either Resolution or transfer of clearing operations.

A number of commenters5 indicated strong concern that the approach in proposed 

§190.14(b) might interfere with DCO rules concerning close-out netting, noting that these rules, 

 2 85 FR 36000 (June 12, 2020).

3 12 U.S.C. 5381 et. seq. 4 Proposed §190.14(b)(2) would enable the trustee to request permission of the Commission to continue operations 

of the DCO while proposed paragraph (b)(3) would set forth the procedure for the Commission to respond to the 

request.

5 See, e.g., FIA at 3-6.
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and the enforceability of such rules, are necessary for the DCO’s rules to constitute a “Qualifying

Master Netting Agreement” (“QMNA”) for purposes of bank capital requirements. These bank 

capital requirements are established by the regulators of the banks and bank holding companies 

that many clearing members are affiliated with or part of: The Federal Deposit Insurance 

Corporation (“FDIC”), the Board of Governors of the Federal Reserve System (“Federal 

Reserve”), and the Office of the Comptroller of the Currency (together, the “Prudential 

Regulators”); qualification of such DCO rules as a QMNA is, in turn, necessary in order for the 

banks and bank holding companies that clearing members are affiliated with or part of to net the 

exposures of their contracts cleared with the DCO in calculating bank capital requirements.

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Qualified Master Netting Agreements. The definition of QMNA7 requires that “any 

exercise of rights under the agreement will not be stayed or avoided under applicable law in the 

relevant jurisdictions, other than receivership, conservatorship, or resolution under the Federal 

Deposit Insurance Act,8 [Title II Resolution] or under any similar insolvency law applicable to” 

government-sponsored enterprises, or “laws of foreign jurisdictions that are substantially 

similar to” the foregoing. A Chapter 7 bankruptcy (including such a bankruptcy subject to part 

190) does not fit within the foregoing list, and thus to the extent that proposed §190.14(b)(2) and 

(3) acts as a stay, it would undermine the QMNA status of DCO rules. If clearing members that 

are part of banks are not able to net their contracts cleared with a DCO, there would be 

significantly increased bank capital requirements associated with such contracts. Such an 

increase in bank capital requirements would disrupt both proprietary and customer clearing.

 6 For the FDIC, see 12 CFR §324.35(c)(2)(i) (measuring clearing member’s trade exposure to a qualifying CCP 

based on either individual derivative contracts or netting sets of derivative contracts); 12 CFR §324.2 (defining 

netting set to mean, as relevant here, “a group of transactions with a single counterparty that are subject to a 

qualifying master netting agreement”). Analogous rules apply to banks regulated by the Federal Reserve (12 CFR 

§217.133(c)(2)(i) and §217.2) and the Office of the Comptroller of the Currency (12 CFR §3.35(c)(2)(i) and §3.2). 7

 See 12 CFR §§ 324.2 (FDIC), 217.2 (Federal Reserve), and 3.2 (OCC). 8 12 U.S.C. 1811.
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Some commenters noted that proposed §190.14(b)(2)(ii)(A) already required, for 

continued operation on a temporary basis, that such operation would need to be practicable, and 

that rules of the DCO that would compel the termination of outstanding contracts upon the order 

for relief would be inconsistent with the practicability of continued operation.9

 Others 

considered that the references to continued operation created an unacceptable level of legal 

uncertainty regarding the enforceability of closeout netting provisions. In addition, some 

commenters expressed doubt that continued operation of a DCO by a trustee in bankruptcy, 

including collection and payment of margin, would be practicable.10 

Withdrawal of proposed §190.14(b)(2) and (3). No DCO registered with the 

Commission has ever been subject to bankruptcy, or even come close to insolvency. In the 

unprecedented and highly unlikely case that such a bankruptcy were to happen, it would be 

beneficial to foster the transfer of clearing operations, including contracts, from the DCO in 

Chapter 7 liquidation to another DCO, to the extent that such an opportunity presents itself. 

However, to the extent that fostering the transfer of clearing operations in a hypothetical 

unprecedented bankruptcy undermines the present-day netting treatment under bank capital rules 

of all bank-affiliated clearing members of a DCO, the benefit is not worth the cost.11 Moreover, 

while it would be beneficial, and it may be possible to develop an acceptable means, to foster 

Resolution under Title II in the case of certain DCOs in Chapter 7 liquidation, the means 

proposed in §190.14(b)(2) and (3) do not result in a practicable and effective way to achieve this 

 9 See, e.g., CME §IV.D. 10 See, e.g., FIA at 6. 11 As noted below, see infra n.233, a transfer approved pursuant to 11 U.S.C. 363 (unlike a transfer pursuant to a 

Title II Resolution ) would not have the effect of avoiding a contractual termination provision.
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result at an acceptable cost. Accordingly, the Commission is withdrawing proposed 

§190.14(b)(2) and (3).12

As discussed further below, the Commission is instead proposing that the part 190 

regulations include a provision that is intended to foster, for a brief period after a bankruptcy 

filing, the Title II Resolution of a DCO, in particular a systemically important DCO (SIDCO),13

but through means different to those in the original proposal for §190.14(b)(2) and (3).

Resolution under Title II of Dodd-Frank. Title II Resolution is designed to address cases 

where a “financial company is in default or danger of default,” and where “the failure of the 

financial company and its resolution under otherwise applicable Federal or State law would have 

serious adverse effects on financial stability in the United States.”14 Default or danger of default 

includes a circumstance where “a case has been, or likely will promptly be, commenced with 

respect to the financial company under the Bankruptcy Code.”15 The Financial Stability 

Oversight Council (“FSOC”) has determined that the failure of either of the two systemically 

important derivatives clearing organizations, CME and ICE Clear Credit, would likely threaten 

the stability of the broader U.S. financial system.16

The process for placing a financial company into Title II Resolution is deliberate and 

intricate. In the case of a SIDCO, this would include a written recommendation by each of the 

 12 The Commission will make appropriate edits to the language in proposed §190.14(b)(1) as part of the process of 

finalizing the Part 190 rule proposal.

13 17 CFR §39.2 defines systemically important derivatives clearing organization to mean “a financial market utility 

that is a derivatives clearing organization registered under section 5b of the Act, which is currently designated by the 

Financial Stability Oversight Council to be systemically important and for which the Commission acts as the 

Supervisory Agency pursuant to 12 U.S.C. 5462(8).” 14 12 U.S.C. 5383(b)(1, 2). 15 12 U.S.C. 5383(c)(4)(A). 16 See 2012 FSOC Annual Report, Appendix A, at 163 (“a significant disruption or failure of CME could have a 

major adverse impact on the U.S. financial markets, the impact of which would be exacerbated by the limited 

number of clearing alternatives currently available for the products cleared by CME. Accordingly, a failure or 

disruption of CME would likely have a significant detrimental effect on the liquidity of the futures and options 

markets, clearing members, which include large financial institutions, and other market participants, which would, in 

turn, likely threaten the stability of the broader U.S. financial system”); id. at 178 (same for ICE Clear Credit with 

respect to swaps markets and the broader U.S. financial system).
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FDIC and the Federal Reserve covering eight statutory factors.

17 Following that 

recommendation, the Secretary of the Treasury would then need to make a determination, in 

consultation with the President, that each of seven statutory factors is met.18 Following such a 

determination, the board of directors of the financial company may acquiesce or consent to the 

appointment of the FDIC as receiver, or there may be a period of judicial review which may 

extend to 24 hours.19

By contrast, a voluntary petition in bankruptcy commences the case, which in turn 

constitutes an order for relief.20 

Accordingly, there exists a possibility that (in the highly unlikely event that a SIDCO 

would consider bankruptcy), the SIDCO could file for bankruptcy before a process to place that 

SIDCO into a Title II Resolution would have completed.21 While the appointment of the FDIC 

as receiver under Title II would automatically result in the dismissal of the prior bankruptcy,22 if 

the bankruptcy filing were to immediately and irrevocably result in the termination of the 

SIDCO’s derivatives contracts with its members, that would undermine the potential success of 

any subsequent Title II Resolution. 

By contrast, if the FDIC is appointed as receiver in a Title II Resolution before a 

SIDCO’s derivatives contracts with its members are terminated as a result of a bankruptcy filing, 

such termination would be stayed by operation of Title II until 5:00 p.m. (eastern time) on the 

 17 See 12 U.S.C. 5383(a)(1)(A). These include a description of the effect that the default of the financial company 

would have on financial stability in the United States and an evaluation of why a case under the Bankruptcy Code is 

not appropriate for the financial company. See 12 U.S.C. 5383(a)(2). 18 See 12 U.S.C. 5383(b). These include that the failure of the financial company under otherwise applicable Federal 

or State law would have serious adverse effects on financial stability in the United States.

19 See 12 U.S.C. 5382(a)(1)(A). 20 See 12 U.S.C. 301. 21 The timeline for an involuntary bankruptcy is longer, in that it involves a petition, an answer (that the debtor has 

21 days to file), and (if the petition is timely controverted) a trial. See 12 U.S.C. 303 (b, h), Federal Rule of

Bankruptcy Procedure 1011(b).

22 See 12 U.S.C. 5388(a).
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business day following the date of the appointment and, if the FDIC were to transfer such 

contracts to, e.g., a bridge entity before that time, termination based on the insolvency or 

financial condition of the SIDCO would be permanently avoided,23 again by operation of Title 

II.24

Supplemental Proposal

In view of the points raised by commenters on the Proposal and upon further review of 

the matter, the Commission is proposing a limited revision to the Proposal that would (1) stay the 

termination of SIDCO contracts for a brief time after bankruptcy in order to foster the success of 

a Title II Resolution, if the FDIC is appointed receiver in such a Resolution within that time, but 

(2) do so in a manner that does not undermine the QMNA status of SIDCO rules (the 

“Supplemental Proposal.”) All other aspects of the Proposal remain the same. 

Specifically, the Supplemental Proposal would impose a temporary stay on the 

termination of derivatives contracts of a SIDCO that is the subject of a bankruptcy case. 25

However, that provision would become effective only if the Commission finds that the 

Prudential Regulators have taken steps to make such a stay consistent with the QMNA status of 

SIDCO rules. As discussed further below, the Commission is seeking comment on whether the 

Supplemental Proposal can reasonably be expected to achieve both of those goals, is feasible, is 

the best design for such a solution, and appropriately reflects consideration of benefits and costs.

As noted above, the present regulations of the Prudential Regulators of the banks and 

bank holding companies that SIDCO clearing members may be affiliate with or part of make any 

 23 See 12 U.S.C. 5390(c)(9)(A), (c)(10)(B)(i). By contrast, a transfer within a bankruptcy proceeding (including a 

“sale free and clear” pursuant to 11 U.S.C. §363), would not have the effect of preventing termination of the 

contracts.

24 As noted above, limitations of termination rights pursuant to Title II are explicitly made consistent with QMNA 

status of an agreement.

25 Under the Supplemental Proposal, the temporary stay would not apply in the case of the bankruptcy of a DCO that 

is not a SIDCO.
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stay under Part 190 inconsistent with QMNA status for DCO rules. Thus, to meet the second 

goal, the Prudential Regulators must take action sufficient to change that result. 

Following analogous stay provision. The Commission notes that the regulations of the 

Prudential Regulators encourage a limited stay period in certain contexts. For example, 12 CFR 

§382.4(b)(1) (FDIC) provides that “[a] covered [qualified financial contract (“QFC”)] may not 

permit the exercise of any default right with respect to the covered QFC that is related, directly 

or indirectly, to an affiliate of the direct party becoming subject to a receivership, insolvency, 

liquidation, resolution, or similar proceeding.” However, §382.4(f) provides that, 

notwithstanding paragraph (b), under certain circumstances, a covered QFC “may permit the 

exercise of a default right after the stay period.” The term “stay period” is defined in §382.4(g) 

as 

“with respect to a receivership, insolvency, liquidation, resolution, or similar proceeding, 

the period of time beginning on the commencement of the proceeding and ending at the 

later of 5 p.m. (EST) on the business day following the date of the commencement of the 

proceeding and 48 hours after the commencement of the proceeding.”26

While the “stay period” in 12 C.F.R. §382 does not apply to a contract with a SIDCO (or 

any other central counterparty) in bankruptcy, it would appear more likely that the Prudential 

Regulators would be comfortable with – and, thus, willing to make changes to the QMNA 

definition that would conform to – a stay period that is of identical length to a stay period that the 

Prudential Regulators already use in another context.

Thus, instead of continued operation for up to six days as originally proposed, the 

Supplemental Proposal would provide for the use of a stay period, applicable to the bankruptcy 

of a SIDCO, that would extend for “the period of time beginning on the commencement of the 

 26 Similar provisions are found in the regulations of the Federal Reserve (see 12 CFR §252.84) and of the Office of 

the Comptroller of the Currency (see 12 CFR §47.5).
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proceeding and ending at the later of 5 p.m. (EST) on the business day following the date of the 

commencement of the proceeding and 48 hours after the commencement of the proceeding.” 

Unlike the original Proposal, there would be no continued collection or payments of 

initial or variation margin during the stay period. Rather, the termination of contracts 

outstanding at the time of the order for relief would be stayed for the stay period. To be sure, 

risk levels would increase during the stay period, as the design of CCPs is based on daily 

collection and payment of variation margin.27 However, in a context where the DCO is (based 

on the prior bankruptcy filing) already in extremis, and collection and payment of variation 

margin is impracticable, such a stay may be the best available alternative (as compared to an 

immediate and irrevocable result of termination of contracts). The Commission notes that this 

risk is mitigated, albeit incompletely, by the limited maximum length of the stay period.28

Need for a Springing Provision. For the reasons discussed above, in order to avoid 

undermining the QMNA status of SIDCO rules, no stay provision regarding DCO contract 

termination rules may be made effective as an element of the DCO bankruptcy provisions of Part 

190 unless and until each of the three Prudential Regulators takes action to make such a stay 

provision consistent with such QMNA status. The Commission seeks to complete the work of 

amending Part 190 in one coherent rulemaking. Moreover, the inclusion of such a stay 

provision, contingent on such action, might encourage the Prudential Regulators promptly to take 

such action.

 27 See 17 CFR §39.14(b) (requiring daily variation settlement). Moreover, while no transactions would be entered 

into during the stay period, and thus there would be no changes in initial margin levels due to change in positions, 

the SIDCO would be unable to change initial margin levels even if an increase in such levels would otherwise be 

warranted.

28 The Commission notes that 48 hours/5 p.m. on the next business day is the maximum length of the stay period. To 

the extent that the process of placing the SIDCO into Title II would be completed sooner, that would further mitigate 

the impact of not collecting and paying variation margin.
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Accordingly, the Supplemental Proposal would provide for the implementation of a stay 

provision, as discussed above, applicable to the bankruptcy of a SIDCO, that would only become 

effective after each of the three Prudential Regulators has publically taken action sufficient to 

make such a stay provision consistent with the QMNA status of SIDCO rules. The length of the 

stay period would be the shorter of (a) the stay period discussed above (found in, e.g., 12 C.F.R. 

§382.4(g)) or (b) the shortest such period specified in the action by any of the Prudential 

Regulators. 

If the Prudential Regulators take such action prior to the finalization of the rulemaking 

embodied in the Proposal (as modified by this Supplemental Proposal), the Commission could 

implement the stay period provision as part of that finalization. Otherwise, the stay period 

provision would not become effective unless and until the Commission subsequently issues an 

Order, confirming that the stay provision is consistent with the QMNA status of SIDCO rules.

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In either event, before acting to implement a stay provision, the Commission would issue a 

request for public comment, limited to the issue of whether the Prudential Regulators’ actions are 

each sufficient to make such a stay provision consistent with the QMNA status of SIDCO 

rules.

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In summary, the Commission is withdrawing proposed §190.14(b)(2) and (3) from the 

Proposal and instead proposing that the final amendments to part 190 would contain a regulation 

with the following elements:

• Subsequent to the order for relief with respect to a SIDCO, a stay period would 

apply to the termination of derivatives contracts outstanding at the time of the 

 29 Authority to issue such an Order would not be delegated to staff, and thus would be excluded from the delegation 

of authority set forth in proposed §190.02(b).

30 As a practical matter, the Commission expects that before issuing the request for public comment, there would be 

contacts by Commission staff with relevant staff at each of the three Prudential Regulators confirming understanding 

of such action.
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order for relief and the exercise of any other default right. There would be no 

continued collection or payments of initial or variation margin during the stay 

period.

• The length of the stay period would be the shorter of (a) the period of time 

beginning on the commencement of the proceeding and ending at the later of 5 

p.m. (EST) on the business day following the date of the commencement of the 

proceeding and 48 hours after the commencement of the proceeding; or (b) the 

shortest such period specified in the action by any of the Prudential Regulators.

• This aspect of the regulation would not be effective until the Commission 

determines (whether as part of finalizing the rulemaking in the Proposal (as 

modified by the Supplemental Proposal) or by a subsequent Order), following 

public notice and comment, that each of the three Prudential Regulators has taken 

action sufficient to make the stay provision consistent with the QMNA status of 

SIDCO rules. Public comment would be limited to whether the Prudential 

Regulators’ actions are sufficient on that point.

Cost-Benefit Considerations

Introduction. Section 15(a) of the CEA requires the Commission to consider the costs 

and benefits of its actions before promulgating a regulation under the CEA or issuing certain 

orders.31 Section 15(a) further specifies that the costs and benefits shall be evaluated in light of 

the following five broad areas of market and public concern: (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 

 31 Section 15(a) of the CEA, 7 U.S.C. 19(a).
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considerations. The Commission considers the costs and benefits resulting from its discretionary 

determinations with respect to the section 15(a) factors (collectively referred to herein as 

“Section 15(a) Factors”).

In the Proposal, the Commission proposed amendments to its regulations governing 

bankruptcy proceedings of commodity brokers in part 190. The Proposal provided the public 

with an opportunity to comment on the Commission’s cost-and-benefit considerations of the 

proposed amendments, including identification and assessment of any costs and benefits not 

discussed therein. In particular, the Commission requested that commenters provide data or any 

other information that they believe supports their positions with respect to the Commission’s 

considerations of costs and benefits.

Baseline. In this release, the Commission sets out the Supplemental Proposal described 

above, and withdraws proposed §190.14(b) and (c). All other aspects of the Proposal remain the 

same. The Proposal set forth the costs and benefits of the Commission’s proposed amendments 

of Part 190. All aspects of the Proposal’s considerations of costs and benefits remain the same 

other than those related specifically to the Supplemental Proposal. Thus, while the 

Commission’s practices under existing part 190 serve as the baseline for the consideration of 

costs and benefits of the Supplemental Proposal, we also discuss as appropriate for clarity the 

differences from the Proposal. The Commission seeks comment on all aspects of the baseline 

laid out above.

The Commission recognizes that the Supplemental Proposal could create benefits, but 

also could impose costs. The Commission has endeavored to assess the expected costs and 

benefits of the proposed rulemaking in quantitative terms, but has not found it possible to do so, 

and instead has identified and considered the costs and benefits of the applicable proposed rules 
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in qualitative terms. The lack of data and information to estimate those costs is attributable in 

part to the nature of the Supplemental Proposal, including that it relates to a situation – the 

failure of a DCO – that is unprecedented and is considered to be highly unlikely.

Consideration of benefits and costs. The benefit of the Supplemental Proposal would be 

to provide a brief opportunity for a Title II Resolution of a SIDCO that has filed for bankruptcy 

to be initiated without the termination of the outstanding derivatives contracts. In the event that 

such a Resolution is initiated during the stay period, this would mitigate, and possibly avoid, the 

disruption to clearing members and clients, and to the U.S. financial system more broadly, that 

would result from such termination of the outstanding contracts. By delaying the effectiveness 

of this provision until a Commission Order confirming that the Prudential Regulators had taken 

action to make such a stay provision consistent with QMNA status for the DCO’s rules, the 

Supplemental Proposal would avoid undermining QMNA status, and thus would avoid 

increasing capital requirements for bank-affiliated clearing members.

The Commission does not anticipate material administrative costs associated with the 

Supplemental Proposal. Nonetheless, there is at least one significant cost: for the duration of the 

stay period, clearing members and clients will be uncertain whether their contracts will continue 

(as part of a Resolution) or be terminated (and thus would need to be replaced). That uncertainty 

would mean that clearing members and clients would be disadvantaged in determining how best 

to protect their positions.

The Commission notes that it has considered alternatives to the Supplemental Proposal. 

First, the Commission could simply withdraw proposed §190.14(b)(2) and (3), and not propose 

anything additional. As discussed above, that would permit the immediate and irrevocable result 

of the termination of a SIDCO’s derivatives contracts with its members, and that result would 
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undermine the success of any subsequent Title II Resolution. Second, and proceeding in the 

opposite direction, the Commission could propose to make the proposed solution immediately 

effective. However, that approach would undermine QMNA status for DCO rules. Third, the 

proposed solution could be extended to all DCOs with respect to potential resolution under Title 

II. However, while it is possible that a DCO that has not been designated as systemically 

important pursuant to Title VIII of Dodd-Frank could nonetheless, in the event of its bankruptcy,

be found eligible for Title II Resolution in that the bankruptcy proceeding “would have serious 

adverse effects on financial stability in the United States,” that is much less likely than in the 

case of a SIDCO and, in light of the impact on clearing members and clients, the Commission 

has determined not to propose to apply a stay period to DCOs that are not SIDCOs.

Finally, while the original proposed §190.14(b)(2) and (3) would have been applied to 

cases where a prompt transfer of clearing operations (including contracts) outside of Title II 

Resolution might be facilitated, the Supplemental Proposal does not include transfers outside of 

Title II Resolution because, as noted above, such a transfer would not avoid the effect of a 

termination provision. Nor does the Commission anticipate that the Prudential Regulators would 

be inclined to permit avoidance of such termination outside the context of a Title II Resolution.

Request for Comment

The Commission requests comment on all aspects of the Supplemental Proposal and the 

issues raised in this document, including in particular: 

1) Do commenters agree with the concerns identified (or consider that there are 

additional or different concerns) with respect to the status of DCO rules as qualifying 

master netting agreements for purposes of bank capital rules? 
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2) Does the Supplemental Proposal achieve the goals of fostering the success of a Title 

II Resolution while avoiding undermining the QMNA status of SIDCO rules? Are 

these the right goals?

3) Do commenters see a better way to achieve these goals? Do commenters see specific 

provisions that should be included in, or exclude from, the Supplemental Proposal?

4) Do commenters agree that the Supplemental Proposal should be limited to SIDCOs 

(i.e., that it should not be applied to DCOs that are not SIDCOs)?

5) The Commission generally requests comment on all aspects of its cost-benefit 

considerations, including the identification and assessment of any costs and benefits 

not discussed herein; the potential costs and benefits of the alternatives discussed 

herein; data and any other information to assist or otherwise inform the Commission’s 

ability to quantify or qualitatively describe the costs and benefits of the proposed 

solution; and substantiating data, statistics, and any other information to support 

positions posited by commenters with respect to the Commission’s discussion. The 

Commission welcomes comment on such costs from all members of the public. 

Commenters may also suggest other alternatives to the proposed approaches. 

Issued in Washington, DC, on [DATE], by the Commission.

Christopher Kirkpatrick,

Secretary of the Commission.