17 CFR Part 190 — Bankruptcy Rules

PART 190—BANKRUPTCY RULES Authority: 7 U.S.C. 1a, 2, 6c, 6d, 6g, 7a-1, 12, 12a, 19, and 24; 11 U.S.C. 362, 546, 548, 556, and 761-767, unless otherwise noted. Source: 86 FR 19421, Apr. 13, 2021, unless otherwise noted. Subpart A—General Provisions § 190.00 Statutory authority, organization, core concepts, scope, and construction. (a) Statutory authority. (1) That certain cash, securities, or other property, or commodity contracts, are to be included in or excluded from customer property or member property; (2) That certain cash, securities, or other property, or commodity contracts, are to be specifically identifiable to a particular customer in a particular capacity; (3) The method by which the business of the commodity broker is to be conducted or liquidated after the date of the filing of the petition under chapter 7 of the Bankruptcy Code, including the payment and allocation of margin with respect to commodity contracts not specifically identifiable to a particular customer pending their orderly liquidation; (4) Any persons to which customer property and commodity contracts may be transferred under section 766 of the Bankruptcy Code; and (5) How a customer's net equity is to be determined. (b) Organization. (c) Core concepts. (1) Commodity brokers. (i) A futures commission merchant; or (ii) A derivatives clearing organization registered under the Act and § 39.3 of this chapter. (2) Account classes. (3) Public customers and non-public customers; Commission segregation requirements; member property Public customers and non-public customers. (A) The cash, securities, or other property held on behalf of the public customers of a futures commission merchant in the futures, foreign futures, or cleared swaps account classes are subject to special segregation requirements imposed under parts 1, 22, and 30 of this chapter for each account class. Although such segregation requirements generally are not applicable to cash, securities, or other property received from or reflected in the futures, foreign futures, or cleared swaps accounts of non-public customers of a futures commission merchant, such transactions and property are customer property within the scope of this part. (B) While parts 1, 22, and 30 of this chapter do not impose special segregation requirements with respect to treatment of cash, securities, or other property of public customers carried in a delivery account, such property does constitute customer property. Thus, the distinction between public and non-public customers is, given the priority for public customers in section 766(h) of the Bankruptcy Code, relevant for the purpose of making distributions to delivery account class customers pursuant to this part. (C) Where a provision in this part affords the trustee discretion, that discretion should be exercised in a manner that the trustee determines will best achieve the overarching goal of protecting public customers as a class by enhancing recoveries for, and mitigating disruptions to, public customers as a class. In seeking to achieve that overarching goal, the trustee has discretion to balance those two sub-goals when they are in tension. Where the trustee is directed to exercise “reasonable efforts” to meet a standard, those efforts should only be less than “best efforts” to the extent that the trustee determines that such an approach would support the foregoing goals. (ii) Clearing organization bankruptcies: Member property and customer property other than member property. (A) Commodity contract transactions cleared for its own account or on behalf of any of its non-public customers (which are cleared in a “house account” at the clearing organization); and (B) Commodity contract transactions cleared on behalf of any public customers of the clearing member (which are cleared in accounts at the clearing organization that is separate and distinct from house accounts). (iii) Preferential assignment among customer classes and account classes for clearing organization bankruptcies. (A) Certain customer property is preferentially assigned to “customer property other than member property” instead of “member property” to the extent that there is a shortfall in funded balances for members' public customer claims. Moreover, to the extent that there are excess funded balances for members' claims in any customer class/account class combination, that excess is also preferentially assigned to “customer property other than member property” to the extent of any shortfall in funded balances for members' public customer claims. (B) Where property is assigned to a particular customer class with more than one account class, it is assigned to the account class for which the funded balance percentage is the lowest until there are two account classes with equal funded balance percentages, then to both such account classes, keeping the funded balance percentage the same, and so forth following the analogous approach if the debtor has more than two account classes within the relevant customer class. (4) Porting of public customer commodity contract positions. (5) Pro rata distribution. (ii) The pro rata distribution principle means that, if there is a shortfall of customer property in an account class, all customers within that account class will suffer the same proportional loss relative to their allowed net equity claims. The principle in this paragraph (c)(5)(ii) applies to all customers, including those who post as collateral specifically identifiable property or letters of credit. The pro rata distribution principle is subject to the special distribution provisions set forth in framework 1 in appendix B of this part for cross-margin accounts and framework 2 in appendix B of this part for funds held outside of the U.S. or held in non-U.S. currency. (6) Deliveries. (A) To make or take delivery of the underlying commodity if the customer holds the contract to a delivery position; or (B) In the case of an option on a commodity: ( 1 ( 2 (ii) Depending upon the circumstances and relevant market, delivery may be effected via a delivery account, a futures account, a foreign futures account or a cleared swaps account, or, when the commodity subject to delivery is a security, in a securities account (in which case property associated with the delivery held in a securities account is not part of any customer account class for purposes of this part). (iii) Although commodity contracts with delivery obligations are typically offset before reaching the delivery stage ( i.e., (iv) In a proceeding in which the debtor is a futures commission merchant, the delivery provisions in this part reflect policy preferences to: (A) Liquidate commodity contracts that settle via delivery before they move into a delivery position; and (B) When such contracts are in a delivery position, to allow delivery to occur, where practicable, outside administration of the debtor's estate. (v) The delivery provisions in this part apply to any commodity that is subject to delivery under a commodity contract, as the term commodity is defined in section of 1a(9) of the Act, whether the commodity itself is tangible or intangible, including agricultural commodities as defined in § 1.3 of this chapter, other non-financial commodities (such as metals or energy commodities) covered by the definition of exempt commodity in section 1a(20) of the Act, and commodities that are financial in nature (such as foreign currencies) covered by the definition of excluded commodity in section 1a(19) of the Act. The delivery provisions also apply to virtual currencies that are subject to delivery under a commodity contract. (d) Scope Proceedings Certain commodity broker proceedings under subchapter IV of chapter 7 of the Bankruptcy Code. (B) Section 101(6) of the Bankruptcy Code recognizes “commodity options dealers,” and “leverage transaction merchants” as defined in sections 761(6) and (13) of the Bankruptcy Code, as separate categories of commodity brokers. There are no commodity options dealers or leverage transaction merchants as of December 8, 2020. Note 1 to paragraph ( b i The Commission intends to adopt rules with respect to commodity options dealers or leverage transaction merchants, respectively, at such time as an entity registers as such. (ii) Futures commission merchants subject to a SIPA proceeding. (iii) Commodity brokers subject to an FDIC proceeding. (2) Account class and implied trust limitations. (ii) No property that would otherwise be included in customer property, as defined in § 190.01, shall be excluded from customer property because such property is considered to be held in a constructive, resulting, or other trust that is implied in equity. (3) Commodity contract exclusions. (i) Options on commodities (including swaps subject to regulation under part 32 of this chapter) that are not centrally cleared by a clearing organization or foreign clearing organization. (ii) Transactions, contracts or agreements that are classified as “forward contracts” under the Act pursuant to the exclusion from the term “future delivery” set out in section 1a(27) of the Act or the exclusion from the definition of a “swap” under section 1a(47)(B)(ii) of the Act, in each case that are not centrally cleared by a clearing organization or foreign clearing organization. (iii) Security futures products as defined in section 1a(45) of the Act when such products are held in a securities account. (iv) Any off-exchange retail foreign currency transaction, contract or agreement described in sections 2(c)(2)(B) or (C) of the Act. (v) Any security-based swap or other security (as defined in section 3 of the Exchange Act), but a security futures product or a mixed swap (as defined in 1a(47)(D) of the Act) that is, in either case, carried in an account for which there is a corresponding account class under this part is not so excluded. (vi) Any off-exchange retail commodity transaction, contract or agreement described in section 2(c)(2)(D) of the Act, unless such transaction, contract or agreement is traded on or subject to the rules of a designated contract market or foreign board of trade as, or as if, such transaction, contract, or agreement is a futures contract. (e) Construction. (2) Where they differ, the definitions set forth in § 190.01 shall be used instead of defined terms set forth in section 761 of the Bankruptcy Code. In many cases, these definitions are based on definitions in parts 1, 22, and 30 of this chapter. Notwithstanding the use of different defined terms, the regulations in this part are intended to be consistent with the provisions and objectives of subchapter IV of chapter 7 of the Bankruptcy Code. (3) In the context of portfolio margining and cross margining programs, commodity contracts and associated collateral will be treated as part of the account class in which, consistent with part 1, 22, 30, or 39 of this chapter, or Commission Order, they are held. (i) Thus, as noted in paragraph (2) of the definition of account class (ii) The concept in paragraph (e)(3)(i) of this section, that the rules of the “home field” will apply, also pertains to securities positions that are, pursuant to an approved cross margining program, held in a commodities account class (in which case the rules of that commodities account class will apply) and to commodities positions that are, pursuant to an approved cross-margining program, held in a securities account (in which case, the rules of the securities account will apply, consistent with section 16(2)(b)(ii) of SIPA, 15 U.S.C. 78lll(2)(b)(ii)). § 190.01 Definitions. For purposes of this part: Account class: (1) Means one or more of each of the following types of accounts maintained by a futures commission merchant or clearing organization (as applicable), each type of which must be recognized as a separate account class by the trustee: (i) Futures account (A) With respect to public customers, the same definition as set forth in § 1.3 of this chapter. (B) With respect to non-public customers: ( 1 ( 2 (ii) Foreign futures account (A) With respect to public customers: ( 1 ( 2 (B) With respect to non-public customers: ( 1 ( 2 (iii) Cleared swaps account (A) With respect to public customers, a cleared swaps customer account, as such term is defined in § 22.1 of this chapter. (B) With respect to non-public customers: ( 1 ( 2 (iv)(A) Delivery account ( 1 ( 2 (B) The delivery account class is further divided into a “physical delivery account class” and a “cash delivery account class,” as provided in § 190.06(b), each of which shall be recognized as a separate class of account by the trustee. (2)(i) If open commodity contracts that would otherwise be attributable to one account class (and any property margining, guaranteeing, securing or accruing in respect of such commodity contracts) are, pursuant to a Commission rule, regulation, or order, or a clearing organization rule approved in accordance with § 39.15(b)(2) of this chapter, held separately from other commodity contracts and property in that account class and are commingled with the commodity contracts and property of another account class, then the trustee must treat the former commodity contracts (and any property margining, guaranteeing, securing, or accruing in respect of such commodity contracts), for purposes of this part, as being held in an account of the latter account class. (ii) The principle in paragraph (2)(i) of this definition will be applied to securities positions and associated collateral held in a commodity account class pursuant to a cross margining program approved by the Commission (and thus treated as part of that commodity account class) and to commodity positions and associated collateral held in a securities account pursuant to a cross margining program approved by the Commission (and thus treated as part of the securities account). (3) For the purpose of this definition, a commodity broker is considered to maintain an account for another person by establishing internal books and records in which it records the person's commodity contracts and cash, securities or other property received from or on behalf of such person or accruing to the credit of such person's account, and related activity (such as liquidation of commodity contract positions or adjustments to reflect mark-to-market gains or losses on commodity contract positions), regardless whether the commodity broker has kept such books and records current or accurate. Act Bankruptcy Code Business day Calendar day Cash delivery account class account class Cash delivery property (1) Credited to such account to pay for receipt of delivery of a commodity under a commodity contract; (2) Credited to such account to collateralize or guarantee an obligation to make or take delivery of a commodity under a commodity contract; or (3) Has been credited to such account as payment received in exchange for making delivery of a commodity under a commodity contract. It also includes property in the form of commodities that have been delivered after the filing date in exchange for cash or cash equivalents held in a delivery account as of the filing date. The cash or cash equivalents must be identified on the books and the records of the debtor as having been received, from or for the account of a particular customer, on or after seven calendar days before the relevant: (i) First notice date in the case of a futures contract; or (ii) Exercise date in the case of a (cleared) option. (4) Cash delivery property also includes any cash transferred by a customer to the trustee on or after the filing date for the purpose of paying for delivery, consistent with § 190.06(a)(3)(ii)(B)( 1 (5) In the case of a contract where one fiat currency is exchanged for another fiat currency, each such currency, to the extent that it is recorded in a delivery account, will be considered cash delivery property. Cash equivalents Cleared swaps account account class Clearing organization Commodity broker (1) A futures commission merchant under the Act, but excludes a person that is “notice-registered” as a futures commission merchant under section 4f(a)(2) of the Act; or (2) A clearing organization, in each case with respect to which there is a “customer” as that term is defined in this section. Commodity contract (1) A futures or options on futures contract executed on or subject to the rules of a designated contract market; (2) A futures or option on futures contract executed on or subject to the rules of a foreign board of trade; (3) A swap as defined in section 1a(47) of the Act and § 1.3 of this chapter, that is directly or indirectly submitted to and cleared by a clearing organization and which is thus a cleared swap as that term is defined in section 1a(7) of the Act and § 22.1 of this chapter; or (4) Any other contract that is a swap for purposes of this part under the definition in this section and is submitted to and cleared by a clearing organization. (5) Notwithstanding paragraphs (1) through (4) of this definition, a security futures product as defined in section 1a(45) of the Act is not a commodity contract for purposes of this part when such contract is held in a securities account. Moreover, a contract, agreement, or transaction described in § 190.00(d)(3) as excluded from the term “commodity contract” is excluded from this definition. Commodity contract account (1) A futures account, foreign futures account, cleared swaps account, or delivery account; or (2) If the debtor is a futures commission merchant, for purposes of identifying customer property for the foreign futures account class (subject to § 190.09(a)(1)), an account maintained for the debtor by a foreign clearing organization or a foreign futures intermediary reflecting futures or options on futures executed on or subject to the rules of a foreign board of trade, including any account maintained on behalf of the debtor's public customers. Court Cover Customer (1)(i) With respect to a futures commission merchant as debtor (including a foreign futures commission merchant as that term is defined in section 761(12) of the Bankruptcy Code), the meaning set forth in sections 761(9)(A) and (B) of the Bankruptcy Code. (ii) With respect to a clearing organization as debtor, the meaning set forth in section 761(9)(D) of the Bankruptcy Code. (2) The term customer includes the owner of a portfolio cross-margining account covering commodity contracts and related positions in securities (as defined in section 3 of the Exchange Act) that is carried as a futures account or cleared swaps customer account pursuant to an appropriate rule, regulation, or order of the Commission. Customer claim of record Customer class provided, however, Customer property customer estate Debtor provided, however, Delivery account account class Distribution Equity Exchange Act et seq. FDIC Filing date Final net equity determination date (1) The day immediately following the day on which all commodity contracts held by or for the account of customers of the debtor have been transferred, liquidated, or satisfied by exercise or delivery; (2) The day immediately following the day on which all property other than commodity contracts held for the account of customers has been transferred, returned or liquidated; (3) The bar date for filing customer proofs of claim as determined by rule 3002(c) of the Federal Rules of Bankruptcy Procedure, the expiration of the six-month period imposed pursuant to section 8(a)(3) of SIPA, or such other date (whether earlier or later) set by the court (or, in the case of the FDIC acting as a receiver pursuant to 12 U.S.C. 5382(a), the deadline set by the FDIC pursuant to 12 U.S.C. 5390(a)(2)(B); or (4) The day following the allowance (by the trustee or by the bankruptcy court) or disallowance (by the bankruptcy court) of all disputed customer net equity claims. Foreign board of trade Foreign clearing organization Foreign future Foreign futures account account class Foreign futures commission merchant Foreign futures intermediary Funded balance Funded net equity Futures futures contract (1) Any transaction, contract or agreement described in section 2(c)(2)(D) of the Act and traded on or subject to the rules of a designated contract market or foreign board of trade, to the extent not covered by the foregoing definition; and (2) Any transaction, contract, or agreement that is classified as a “forward contract” under the Act pursuant to the exclusion from the term “future delivery” set out in section 1a(27) of the Act or the exclusion from the definition of a “swap” under section 1a(47)(B)(ii) of the Act, provided that such transaction, contract, or agreement is traded on or subject to the rules of a designated contract market or foreign board of trade and is cleared by, respectively, a clearing organization or foreign clearing organization the same as if it were a futures contract. Futures account account class House account In-the-money (1) With respect to a call option, when the value of the underlying interest (such as a commodity or futures contract) which is the subject of the option exceeds the strike price of the option; and (2) With respect to a put option, when the value of the underlying interest (such as a commodity or futures contract) which is the subject of the option is exceeded by the strike price of the option. Joint account Member property Net equity Non-public customer (1) With respect to a futures commission merchant, any customer that is not a public customer; and (2) With respect to a clearing organization, any person whose account carried on the books and records of: (i) A member of the clearing organization that is a futures commission merchant, is classified as a proprietary account under § 1.3 of this chapter (in the case of the futures or foreign futures account class) or as a cleared swaps proprietary account under § 22.1 of this chapter (in the case of the cleared swaps account class); or (ii) A member of the clearing organization that is a foreign broker, is classified or treated as proprietary under and for purposes of: (A) The rules of the clearing organization; or (B) The jurisdiction of incorporation of such member. Open commodity contract i.e., Order for relief Person Physical delivery account class account class Physical delivery property (1) In general. (i) That the debtor holds for the account of a customer for the purpose of making delivery of such commodity on the customer's behalf, which as of the filing date or thereafter, can be identified on the books and records of the debtor as held in a delivery account for the benefit of such customer. Cash or cash equivalents received after the filing date in exchange for delivery of such physical delivery property shall also constitute physical delivery property; (ii) That the debtor holds for the account of a customer and that the customer received or acquired by taking delivery under an expired or exercised commodity contract and which, as of the filing date or thereafter, can be identified on the books and records of the debtor as held in a delivery account for the benefit of such customer, regardless how long such property has been held in such account; or (iii) Where property that the debtor holds in a futures account, foreign futures account, or cleared swaps account, or, if the commodity is a security, in a securities account, would meet the criteria listed in paragraph (1) or (2) of this definition, but for the fact of being held in such account rather than a delivery account, such property will be considered physical delivery property solely for purposes of the obligations to make or take delivery of physical delivery property pursuant to § 190.06. (iv) Commodities or documents of title that are not held by the debtor and are delivered or received by a customer in accordance with § 190.06(a)(2) (or in accordance with § 190.06(a)(2) in conjunction with § 190.16(a) if the debtor is a clearing organization) to fulfill a customer's delivery obligation under a commodity contract will be considered physical delivery property solely for purposes of the obligations to make or take delivery of physical delivery property pursuant to § 190.06. As this property is held outside of the debtor's estate, it is not subject to pro rata distribution. (2) Special cases. (ii) In a case where the final settlement price is negative, i.e., Primary liquidation date Public customer (1) With respect to a futures commission merchant and in relation to: (i) The futures account class, a futures customer as defined in § 1.3 of this chapter whose futures account is subject to the segregation requirements of section 4d(a) of the Act and the regulations in this chapter that implement section 4d(a), including as applicable §§ 1.20 through 1.30 of this chapter; (ii) The foreign futures account class, a 30.7 customer as defined in § 30.1 of this chapter whose foreign futures accounts is subject to the segregation requirements of § 30.7 of this chapter; (iii) The cleared swaps account class, a Cleared Swaps Customer as defined in § 22.1 of this chapter whose cleared swaps account is subject to the segregation requirements of part 22 of this chapter; and (iv) The delivery account class, a customer that is or would be classified as a public customer if the property reflected in the customer's delivery account had been held in an account described in paragraph (1)(i), (ii), or (iii) of this definition. (2) With respect to a clearing organization, any customer of that clearing organization that is not a non-public customer. Securities account Security SIPA et seq. Specifically identifiable property (1)(i) The following property received, acquired, or held by or for the account of the debtor from or for the futures account, foreign futures account, or cleared swaps account of a customer: (A) Any security which as of the filing date is: ( 1 i ( ii ( iii ( iv ( 2 i ( ii ( iii (B) Any warehouse receipt, bill of lading, or other document of title which as of the filing date: ( 1 ( 2 (ii) Any open commodity contracts treated as specifically identifiable property in accordance with § 190.03(c)(2); and (iii) Any physical delivery property described in paragraphs (1) through (3) of the definition of physical delivery property in this section. (2) Notwithstanding paragraphs (1) and (3) of this definition, security futures products, and any money, securities, or property held to margin, guarantee, or secure such products, or accruing as a result of such products, shall not be considered specifically identifiable property for the purposes of subchapter IV of the Bankruptcy Code or this part, if held in a securities account. (3) No property that is not explicitly included in this definition may be treated as specifically identifiable property. Strike price Substitute customer property (1) The return of specifically identifiable property by the trustee; or (2) The return of, or an agreement not to draw upon, a letter of credit received, acquired or held to margin, guarantee, secure, purchase, or sell a commodity contract. Swap Trustee Undermargined Variation settlement § 190.02 General. (a) Request for exemption. (2) A request pursuant to paragraph (a)(1) of this section— (i) May be made ex parte (ii) Must state the particular provision of this part with respect to which the exemption or extension is sought, the reason for the requested exemption or extension, the amount of time sought if the request is for an extension, and the reason why such exemption or extension would not be contrary to the purposes of the Bankruptcy Code and this part. (3) The Director of the Division of Clearing and Risk, or members of the Commission staff designated by the Director, shall grant, deny, or otherwise respond to a request, on the basis of the information provided in any such request and after consultation with the Director of the Market Participants Division or members of the Commission staff designated by the Director, unless exigent circumstances require immediate action precluding such prior consultation, and shall communicate that determination by the most appropriate means to the person making the request. (b) Delegation of authority to the Director of the Division of Clearing and Risk. (2) The Director of the Division of Clearing and Risk may submit to the Commission for its consideration any matter which has been delegated to the Director pursuant to paragraph (b)(1) of this section. (3) Nothing in this section shall prohibit the Commission, at its election, from exercising its authority delegated to the Director of the Division of Clearing and Risk under paragraph (b)(1) of this section. (c) Forward contracts. (d) Other. (e) Rule of construction. (f) Receivers. (g) Definition of “allowed.” Subpart B—Futures Commission Merchant as Debtor § 190.03 Notices and proofs of claims. (a) Notices-means of providing To the Commission. [email protected]. (2) To Customers. (b) Notices to the Commission and designated self-regulatory organizations Of commencement of a proceeding. (2) Of transfers under section 764(b) of the Bankruptcy Code. (c) Notices to customers Specifically identifiable property other than open commodity contracts. (2) Open commodity contracts carried in hedging accounts. (i) If the trustee does not exercise such authority, such open commodity contracts do not constitute specifically identifiable property. (ii) If the trustee exercises such authority: (A) The trustee shall use reasonable efforts to promptly notify, in accordance with paragraph (a)(2) of this section, each relevant public customer of such determination. (B)( 1 ( 2 (C) Such notice must also inform the customer that: ( 1 2 ( 2 ( 3 ( 4 (3) Involuntary cases. (4) Notice of bankruptcy and request for proof of customer claim. (d) Notice of court filings. (e) Proof of customer claim. (1) The class of commodity contract account upon which each claim is based ( i.e., (2) Whether the claimant is a public customer or a non-public customer; (3) The number of commodity contract accounts held by each claimant, and, for each such account: (i) The account number; (ii) The name in which the account is held; (iii) The balance as of the last account statement for the account, and information regarding any activity in the account from the date of the last account statement up to and including the filing date that affected the balance of the account; (iv) The capacity in which the account is held; (v) Whether the account is a joint account and, if so, the amount of the claimant's percentage interest in that account and whether participants in the joint account are claiming jointly or separately; (vi) Whether the account is a discretionary account; (vii) Whether the account is an individual retirement account for which there is a custodian; and (viii) Whether the account is a cross-margining account for futures and securities; (4) A description of any accounts held by the claimant with the debtor that are not commodity contract accounts; (5) A description of all claims against the debtor not based upon a commodity contract account of the claimant or an account listed in response to paragraph (e)(4) of this section; (6) A description of all claims of the debtor against the claimant not included in the balance of a commodity contract account of the claimant; (7) A description of and the value of any open positions, unliquidated securities, or other unliquidated property held by the debtor on behalf of the claimant, indicating the portion of such property, if any, which was included in the information provided in paragraph (e)(3) of this section, and identifying any such property which would be specifically identifiable property as defined in § 190.01; (8) Whether the claimant holds positions in security futures products, and, if so, whether those positions are held in a futures account, a foreign futures account, or a securities account; (9) Whether the claimant wishes to receive payment in kind, to the extent practicable, for any claim for unliquidated securities or other unliquidated property; and (10) Copies of any documents which support the information contained in the proof of customer claim, including without limitation, customer confirmations, account statements, and statements of purchase or sale. (f) Proof of claim form. (1) If there are no open commodity contracts that are being treated as specifically identifiable property (e.g., if the customer proof of claim form was distributed after the primary liquidation date), the trustee should modify the customer proof of claim form to delete references to open commodity contracts as specifically identifiable property. (2) In the event the trustee determines that the debtor's books and records reflecting customer transactions are not reasonably reliable, or account statements are not available from which account balances as of the date of transfer or liquidation of customer property may be determined, the proof of claim form used by the trustee should be modified to take into account the particular facts and circumstances of the case. § 190.04 Operation of the debtor's estate—customer property. (a) Transfers All cases. (2) Involuntary cases. provided, however, (b) Treatment of open commodity contracts Payments by the trustee. (i) To the extent within the trustee's control, the trustee shall not make any payments on behalf of any commodity contract account on the books and records of the debtor that is in deficit; provided, however, (ii) Any margin payments made by the trustee with respect to a specific customer account shall not exceed the funded balance for that account; (iii) The trustee shall not make any payments on behalf of non-public customers of the debtor from funds that are segregated for the benefit of public customers; (iv) If the trustee receives payments from a customer in response to a margin call, then to the extent within the trustee's control, the trustee must use such payments to make margin payments for the open commodity contract positions of such customer; (v) The trustee may not use payments received from one public customer to meet the margin (or any other) obligations of any other customer; and (vi) If funds segregated for the benefit of public customers in a particular account class exceed the aggregate net equity claims for all public customers in such account class, the trustee may use such excess funds to meet the margin obligations for any public customer in such account class whose account is under-margined (as described in paragraph (b)(4) of this section) but not in deficit, provided that the trustee issues a margin call to such customer and provided further that the trustee shall liquidate such customer's open commodity contracts if the customer fails to make the margin payment within a reasonable time as provided in paragraph (b)(4) of this section. (2) Margin calls. (3) Margin payments by the customer. (4) Trustee obligation to liquidate certain open commodity contracts. (5) Partial liquidation of open commodity contracts by others. (c) Contracts moving into delivery position. (1) If such contract is a futures contract or a cleared swaps contract, before the earlier of the last trading day or the first day on which notice of intent to deliver may be tendered with respect thereto, or otherwise before the debtor or its customer incurs an obligation to make or take delivery of the commodity under such contract; (2) If such contract is a long option on a commodity and has value, before the first date on which the contract could be automatically exercised or the last date on which the contract could be exercised if not subject to automatic exercise; or (3) If such contract is a short option on a commodity that is in-the-money in favor of the long position holder, before the first date on which the long option position could be exercised. (d) Liquidation or offset. (1) Open commodity contracts. (i) Commodity contracts that are specifically identifiable property (if applicable) and are subject to customer instructions to transfer (in lieu of liquidating) as provided in § 190.03(c)(2), provided that the customer is in compliance with the terms of § 190.09(d)(2); and (ii) Open commodity contract positions that are in a delivery position, which shall be treated in accordance with the provisions of § 190.06. (2) Specifically identifiable property, other than open commodity contracts or physical delivery property. (i) The fair market value of such property is less than 75% of its fair market value on the date of entry of the order for relief; (ii) Failure to liquidate the specifically identifiable property may result in a deficit balance in the applicable customer account; or (iii) The trustee has not received instructions to return pursuant to § 190.03(c)(1), or has not returned such property upon the terms contained in § 190.09(d)(1). (3) Letters of credit. (i) If a customer fails to provide substitute customer property within a reasonable time specified by the trustee, the trustee may, if the letter of credit has not expired, draw upon the full amount of the letter of credit or any portion thereof. (ii) For any letter of credit referred to in this paragraph (d)(3), the trustee shall treat any portion that is not drawn upon (less the value of any substitute customer property delivered by the customer) as having been distributed to the customer for purposes of calculating entitlements to distribution or transfer. The expiration of the letter of credit on or at any time after the date of the order for relief shall not affect such calculation. (iii) Any proceeds of a letter of credit drawn by the trustee, or substitute customer property posted by a customer, shall be considered customer property in the account class applicable to the original letter of credit. (iv) The trustee shall, in exercising their discretion with regard to addressing letters of credit, including as to the timing and amount of a request for substitute customer property, endeavor to mitigate, to the extent practicable, the adverse effects upon customers that have posted letters of credit, in a manner that achieves pro rata (4) All other property. (e) Liquidation of open commodity contracts By the trustee or a clearing organization in the market Debtor as a clearing member. (ii) Debtor not a clearing member. (2) By the trustee or a clearing organization via book entry offset. (3) By a futures commission merchant or foreign futures intermediary. (4) Liquidation only. provided, however, (ii) Notwithstanding paragraph (e)(4)(i) of this section, the trustee may, with the written permission of the Commission, operate the business of the debtor in the ordinary course, including the purchase or sale of new commodity contracts on behalf of the customers of the debtor under appropriate circumstances, as determined by the Commission. (f) Long option contracts. § 190.05 Operation of the debtor's estate—general. (a) Compliance with the Act and regulations in this chapter. (b) Computation of funded balance. (c) Records Maintenance. (2) Accessibility. (d) Customer statements. (e) Other matters Disbursements. (2) Investment. (f) Residual interest. § 190.06 Making and taking delivery under commodity contracts. (a) Deliveries General. i.e., (2) Delivery made or taken on behalf of a customer outside of the administration of the debtor's estate. (A) In the normal course directly by the customer; (B) By substitution of the customer for the commodity broker; or (C) Through agreement of the buyer and seller to alternative delivery procedures. (ii) Where a customer delivers physical delivery property in settlement of a commodity contract outside of the administration of the debtors' estate in accordance with paragraph (a)(2)(i) of this section, any property of such customer held at the debtor in connection with such contract must nonetheless be included in the net equity claim of that customer, and, as such, can only be distributed pro rata at the time of, and as part of, any distributions to customers made by the trustee. (3) Delivery as part of administration of the debtor's estate. (i) To facilitate the making or taking of delivery directly by a customer, the trustee may, as it determines reasonable under the circumstances of the case and consistent with the pro rata distribution of customer property by account class: (A) When a customer is obligated to make delivery, return any physical delivery property to the customer that is held by the debtor for or on behalf of the customer under the terms set forth in § 190.09(d)(1)(ii), to allow the customer to deliver such property to fulfill its delivery obligation under the commodity contract; or (B) When a customer is obligated to take delivery: ( 1 1 ( i ( ii ( 2 ( i ( ii 1 (C) Impose such conditions on the customer as it considers appropriate to assure that property returned to the customer is used to fulfill the customer's delivery obligations. (ii) If the trustee does not return physical delivery property, cash delivery property, or other property in the form of cash or cash equivalents to the customer as provided in paragraph (a)(3)(i) of this section, subject to paragraph (a)(4) of this section: (A) To the extent practical, the trustee shall make or take delivery of physical delivery property in the same manner as if no bankruptcy had occurred, and when making delivery, the party to which delivery is made must pay the full price required for taking such delivery; or (B) When taking delivery of physical delivery property: ( 1 ( 2 ( 3 2 (4) Deliveries in a securities account. provided, however, (5) Delivery made or taken on behalf of proprietary account. (b) Special account class provisions for delivery accounts. (i) Physical delivery property held in delivery accounts as of the filing date, and the proceeds of any such physical delivery property subsequently received, as part of the physical delivery account class; and (ii) Cash delivery property in delivery accounts as of the filing date, along with any physical delivery property for which delivery is subsequently taken on behalf of a customer in accordance with paragraph (a)(3) of this section, as part of a separate cash delivery account class. (2)(i) If the debtor holds any cash or cash equivalents in an account maintained at a bank, clearing organization, foreign clearing organization, or other person, under a name or in a manner that clearly indicates that the account holds property for the purpose of making payment for taking delivery, or receiving payment for making delivery, of a commodity under commodity contracts, such property shall (subject to § 190.09) be considered customer property— (A) In the cash delivery account class if held for making payment for taking delivery; and (B) In the physical delivery account class, if held as a result of receiving such payment for a making delivery after the filing date. (ii) Any other property (excluding property segregated for the benefit of customer in the futures, foreign futures or cleared swaps account class) that is traceable as having been held or received for the purpose of making delivery, or as having been held or received as a result of taking delivery, of a commodity under commodity contracts, shall (subject to § 190.09) be considered customer property— (A) In the cash delivery account class if received after the filing date in exchange for taking delivery; and (B) Otherwise shall be considered customer property in the physical delivery account class. § 190.07 Transfers. (a) Transfer rules. (1) Are inconsistent with the provisions of this part; (2) Interfere with the acceptance by its members of transfers of commodity contracts, and the property margining or securing such contracts, from futures commission merchants that are required to transfer accounts pursuant to § 1.17(a)(4) of this chapter; or (3) Interfere with the acceptance by its members of transfers of commodity contracts, and the property margining or securing such contracts, from a futures commission merchant that is a debtor as defined in § 190.01, if such transfers have been approved by the Commission, provided, however, (i) Limit the exercise of any contractual right of a clearing organization or other registered entity to liquidate or transfer open commodity contracts; or (ii) Be interpreted to limit a clearing organization's ability adequately to manage risk. (b) Requirements for transferees. (2) Any transferee that accepts a transfer of open commodity contracts from the estate of the debtor— (i) Accepts the transfer subject to any loss that may arise in the event the transferee cannot recover from the customer any deficit balance that may arise related to the transferred open commodity contracts. (ii) If the commodity contracts were held for the account of a customer: (A) Must keep such commodity contracts open at least one business day after their receipt, unless the customer for whom the transfer is made fails to respond within a reasonable time to a margin call for the difference between the margin transferred with such commodity contracts and the margin which such transferee would require with respect to a similar set of commodity contracts held for the account of a customer in the ordinary course of business; and (B) May not collect commissions with respect to the transfer of such commodity contracts. (3) A transferee may accept open commodity contracts and property, and open accounts on its records, for customers whose commodity contracts and property are transferred pursuant to this part prior to completing customer diligence, provided that account opening diligence as required by law (including the risk disclosures referred to in § 1.65(a)(3) of this chapter) is performed, and records and information required by law are obtained, as soon as practicable, but in any event within six months of the transfer, unless this time is extended for a particular account, transferee, or debtor by the Commission. (4)(i) Any account agreements governing a transferred account (including an account that has been partially transferred) shall be deemed assigned to the transferee by operation of law and shall govern the transferee and customer's relationship until such time as the transferee and customer enter into a new agreement; provided, however, (ii) Paragraph (b)(4)(i) of this section shall not apply where the customer has a pre-existing account agreement with the transferee futures commission merchant. In such a case, the transferred account will be governed by that pre-existing account agreement. (5) If open commodity contracts or any specifically identifiable property has been, or is to be, transferred in accordance with section 764(b) of the Bankruptcy Code and this section, customer instructions previously received by the trustee with respect to open commodity contracts or with respect to specifically identifiable property, shall be transmitted to the transferee of property, which shall comply therewith to the extent practicable. (c) Eligibility for transfer under section 764(b) of the Bankruptcy Code—accounts eligible for transfer. (1) The debtor's own account or the accounts of general partners of the debtor if the debtor is a partnership; and (2) Accounts that are in deficit. (d) Special rules for transfers under section 764(b) of the Bankruptcy Code Effecting transfer. (2) Partial transfers; multiple transferees Of the customer estate. (ii) Of a customer's commodity contract account. (3) Letters of credit. (4) Physical delivery property. (5) No prejudice to other customers. (i) Customer claims of record; and (ii) Estimates of other customer claims made in the trustee's reasonable discretion based on available information, in each case as of the calendar day immediately preceding transfer. (e) Prohibition on avoidance of transfers under section 764(b) of the Bankruptcy Code Pre-relief transfers. (i) The transfer of commodity contract accounts or customer property prior to the entry of the order for relief in compliance with § 1.17(a)(4) of this chapter unless such transfer is disapproved by the Commission; (ii) The transfer, withdrawal, or settlement, prior to the order for relief at the request of a public customer, including a transfer, withdrawal, or settlement at the request of a public customer that is a commodity broker, of commodity contract accounts or customer property held from or for the account of such customer by or on behalf of the debtor unless: (A) The customer acted in collusion with the debtor or its principals to obtain a greater share of customer property or the bankruptcy estate than that to which it would be entitled under this part; or (B) The transfer is disapproved by the Commission; (iii) The transfer prior to the order for relief by a clearing organization, or by a receiver that has been appointed for the futures commission merchant (FCM) that is now a debtor, of one or more accounts held for or on behalf of customers of the debtor, or of commodity contracts and other customer property held for or on behalf of customers of the debtor, provided that the transfer is not disapproved by the Commission. (2) Post-relief transfers. (i) The transfer of a commodity contract account or customer property eligible to be transferred under paragraphs (c) and (d) of this section made by the trustee or by any clearing organization on or before the seventh calendar day after the entry of the order for relief, as to which the Commission has not disapproved the transfer; or (ii) The transfer of a commodity contract account or customer property at the direction of the Commission on or before the seventh calendar day after the order for relief, upon such terms and conditions as the Commission may deem appropriate and in the public interest. (f) Commission action. (1) Prohibit the transfer of a particular set or sets of commodity contract accounts and customer property; or (2) Permit transfers of a particular set or sets of commodity contract accounts and customer property that do not comply with the requirements of this section. § 190.08 Calculation of funded net equity. For purposes of this subpart, funded net equity shall be computed as follows: (a) Funded claim. (b) Net equity. (1) Step 1-equity determination. (A) The ledger balance; (B) The open trade balance; and (C) The realizable market value, determined as of the close of the market on the last preceding market day, of any securities or other property held by or for the debtor from or for such account, plus accrued interest, if any. (ii) For the purposes of this paragraph (b)(1), the ledger balance of a customer account shall be calculated by: (A) Adding: ( 1 ( 2 ( 3 ( 4 (B) Subtracting from the result: ( 1 ( 2 ( 3 (iii) For purposes of this paragraph (b)(1), the open trade balance of a customer's account shall be computed by subtracting the unrealized loss in value of the open commodity contracts held by or for such account from the unrealized gain in value of the open commodity contracts held by or for such account. (iv) For purposes of this paragraph (b)(1), in calculating the ledger balance or open trade balance of any customer, exclude any security futures products, any gains or losses realized on trades in such products, any property received to margin, guarantee, or secure such products (including interest thereon or the proceeds thereof), to the extent any of the foregoing are held in a securities account, and any disbursements to or on behalf of such customer in connection with such products or such property held in a securities account. (2) Step 2-customer determination (aggregation). (i) Except as otherwise provided in this paragraph (b)(2), all accounts that are maintained with a debtor in a person's name and that, under this paragraph (b)(2), are deemed to be held by that person in its individual capacity shall be deemed to be held in the same capacity. (ii) An account maintained with a debtor by a guardian, custodian, or conservator for the benefit of a ward, or for the benefit of a minor under the Uniform Gift to Minors Act, shall be deemed to be held in a separate capacity from accounts held by such guardian, custodian or conservator in its individual capacity. (iii) An account maintained with a debtor in the name of an executor or administrator of an estate in its capacity as such shall be deemed to be held in a separate capacity from accounts held by such executor or administrator in its individual capacity. (iv) An account maintained with a debtor in the name of a decedent, in the name of the decedent's estate, or in the name of the executor or administrator of such estate in its capacity as such shall be deemed to be accounts held in the same capacity. (v) An account maintained with a debtor by a trustee shall be deemed to be held in the individual capacity of the grantor of the trust unless the trust is created by a valid written instrument for a purpose other than avoidance of an offset under the regulations contained in this part. A trust account which is not deemed to be held in the individual capacity of its grantor under this paragraph (b)(2)(v) shall be deemed to be held in a separate capacity from accounts held in an individual capacity by the trustee, by the grantor or any successor in interest of the grantor, or by any trust beneficiary, and from accounts held by any other trust. (vi) An account maintained with a debtor by a corporation, partnership, or unincorporated association shall be deemed to be held in a separate capacity from accounts held by the shareholders, partners or members of such corporation, partnership, or unincorporated association, if such entity was created for purposes other than avoidance of an offset under the regulations contained in this part. (vii) A hedging account of a person shall be deemed to be held in the same capacity as a speculative account of such person. (viii) Subject to paragraphs (b)(2)(ix) and (xiv) of this section, the futures accounts, foreign futures accounts, delivery accounts, and cleared swaps accounts of the same person shall not be deemed to be held in separate capacities: Provided, however, (ix) An omnibus customer account for public customers of a futures commission merchant maintained with a debtor shall be deemed to be held in a separate capacity from any omnibus customer account for non-public customers of such futures commission merchant and from any account maintained with the debtor on its own behalf or on behalf of any non-public customer. (x) A joint account maintained with the debtor shall be deemed to be held in a separate capacity from any account held in an individual capacity by the participants in such account, from any account held in an individual capacity by a commodity pool operator or commodity trading advisor for such account, and from any other joint account; provided, however, (xi) An account maintained with a debtor in the name of a plan that is subject to the terms of the Employee Retirement Income Security Act of 1974 and the regulations in 29 CFR chapter XXV, or similar state, Federal, or foreign laws or regulations applicable to retirement or pension plans, shall be deemed to be held in a separate capacity from an account held in an individual capacity by the plan administrator, any employer, employee, participant, or beneficiary with respect to such plan. (xii) Except as otherwise provided in this section, an account maintained with a debtor by an agent or nominee for a principal or a beneficial owner shall be deemed to be an account held in the individual capacity of such principal or beneficial owner. (xiii) With respect to the cleared swaps account class, each individual cleared swaps customer account within each cleared swap omnibus customer account referred to in paragraph (b)(2)(viii) of this section shall be deemed to be held in a separate capacity from each other such individual cleared swaps customer account, subject to the provisions of paragraphs (b)(2)(i) through (xi) of this section. (xiv) Accounts held by a customer in separate capacities shall be deemed to be accounts of different customers. The burden of proving that an account is held in a separate capacity shall be upon the customer. (3) Step 3-setoffs. (ii) Any obligation to the debtor owed by a customer which is not required to be included in computing the equity of that customer under paragraph (b)(1) of this section (defined as x), must be deducted from any obligation to the customer owed by the debtor which is not required to be included in computing the equity of that customer (defined as y). If the former amount (x) exceeds the latter (y), the excess (x-y) must be deducted from the equity balance of the customer obtained after performing the preceding calculations required by paragraph (b) of this section, provided, that if the customer owns more than one class of accounts with a positive equity balance, the excess (again, x-y) must be allocated and offset against each positive equity balance in the same proportion as that positive equity balance bears to the total of all positive equity balances of accounts of different classes held by such customer. (iii) A negative equity balance obtained with respect to one customer account class must be set off against a positive equity balance in any other account class of such customer held in the same capacity, provided, that if a customer owns more than one class of accounts with a positive equity balance, such negative equity balance must be offset against each positive equity balance in the same proportion as that positive equity balance bears to the total of all positive equity balances in accounts of different classes held by such customer. (iv) To the extent any indebtedness of the debtor to the customer which is not required to be included in computing the equity of such customer under paragraph (b)(1) of this section exceeds such indebtedness of the customer to the debtor, the customer claim therefor will constitute a general creditor claim rather than a customer property claim, and the net equity therefor shall be separately calculated. (v) The rules pertaining to separate capacities and permitted setoffs contained in this section shall only be applied subsequent to the entry of an order for relief; prior to that date, the provisions of § 1.22 of this chapter and of sections 4d(a)(2) and 4d(f) of the Act (and, in each case, the regulations in part 1, 22, or 30 of this chapter that implement sections 4d(a)(2) and 4d(f)) shall govern what setoffs are permitted. (4) Step 4-correction for distributions. Provided, however, (5) Step 5-correction for ongoing events. (c) Calculation of funded balance. Funded balance (1) Funded balance computation. (i) Multiplying the ratio of the amount of the net equity claim of such customer (defined as x) less the amounts referred to in paragraph (c)(1)(ii) of this section of such customer for any account class (defined as y) divided by the sum of the net equity claims of all customers for accounts of that class (defined as p) less the amounts referred to in paragraph (c)(1)(ii) of this section of all customers for accounts of that class (defined as q) (thus, ((x-y)/(p-q)) by the sum of: (A) The value of letters of credit received, acquired, or held to margin, guarantee, secure, purchase, or sell a commodity contract relating to all customer accounts of the same class; (B) The value of the money, securities, or other property segregated on behalf of all customer accounts of the same class less the amounts referred to in paragraph (c)(1)(ii) of this section; (C) The value of any money, securities, or other property which must be allocated under § 190.09 to all customer accounts of the same class; and (D) The amount of any add-back required under paragraph (b)(4) of this section; and (ii) Then adding 100% of— (A) Any margin payment made between the entry of the order for relief (or, in an involuntary case, the date on which the petition for bankruptcy is filed) and the primary liquidation date; provided, however, (B) For cash delivery property, any cash transferred to the trustee on or after the filing date for the purpose of paying for delivery. (2) Corrections to funded balance. (i) Added claimants; (ii) Disallowed claims; (iii) Liquidation of unliquidated claims at a value other than their estimated value; and (iv) Recovery of property. (d) Valuation. (1) Commodity contracts Open contracts. provided, however, (ii) Liquidated contracts. (A) Weighted average. (B) Bulk liquidation. (2) Securities. provided, however, (3) Commodities held in inventory. (4) Letters of credit. (5) All other property. provided, however, § 190.09 Allocation of property and allowance of claims. The property of the debtor's estate must be allocated among account classes and between customer classes as provided in this section. (Property connected with certain cross-margining arrangements is subject to the provisions of framework 1 in appendix B to this part.) The property so allocated will constitute a separate estate of the customer class and the account class to which it is allocated, and will be designated by reference to such customer class and account class. (a) Scope of customer property. (i) All cash, securities, or other property or the proceeds of such cash, securities, or other property received, acquired, or held by or for the account of the debtor, from or for the account of a customer, including a non-public customer, which is: (A) Property received, acquired, or held to margin, guarantee, secure, purchase or sell a commodity contract; (B) Open commodity contracts; (C) Physical delivery property as that term is defined in paragraphs (1) through (3) in the definition of that term in § 190.01; (D) Cash delivery property, or other cash, securities, or other property received by the debtor as payment for a commodity to be delivered to fulfill a commodity contract from or for the commodity customer account of a customer; (E) Profits or contractual rights accruing to a customer as the result of a commodity contract; (F) Letters of credit, including any proceeds of a letter of credit drawn by the trustee, or substitute customer property posted by the customer, pursuant to § 190.04(d)(3); (G) Securities held in a portfolio margining account carried as a futures account or a cleared swaps customer account; or (H) Property hypothecated under § 1.30 of this chapter to the extent that the value of such property exceeds the proceeds of any loan of margin made with respect thereto; and (ii) All cash, securities, or other property which: (A) Is segregated for customers on the filing date; (B) Is a security owned by the debtor to the extent there are customer claims for securities of the same class and series of an issuer; (C) Is specifically identifiable to a customer; (D) Was property of a type described in paragraph (a)(1)(i)(A) of this section that is subsequently recovered by the avoidance powers of the trustee or is otherwise recovered by the trustee on any other claim or basis; (E) Represents recovery of any debit balance, margin deficit, or other claim of the debtor against a customer; (F) Was unlawfully converted but is part of the debtor's estate; (G) Constitutes current assets of the debtor (as of the date of the order for relief) within the meaning of § 1.17(c)(2) of this chapter, including the debtor's trading or operating accounts and commodities of the debtor held in inventory, in the greater of— ( 1 ( 2 (H) Is other property of the debtor that any applicable law, rule, regulation, or order requires to be set aside for the benefit of customers; (I) Is property of the debtor's estate recovered by the Commission in any proceeding brought against the principals, agents, or employees of the debtor; (J) Is proceeds from the investment of customer property by the trustee pending final distribution; (K) Is a payment from an insurer to the trustee arising from or related to a claim related to the conversion or misuse of customer property; or (L) Is cash, securities, or other property of the debtor's estate, including the debtor's trading or operating accounts and commodities of the debtor held in inventory, but only to the extent that the property enumerated in paragraphs (a)(1)(i)(F) and (a)(1)(ii)(A) through (K) of this section is insufficient to satisfy in full all claims of public customers. Such property includes “customer property,” as defined in section 16(4) of SIPA, 15 U.S.C. 78lll(4), that remains after allocation in accordance with section 8(c)(1)(A)-(D) of SIPA, 15 U.S.C. 78fff-2(c)(1)(A)-(D) and that is allocated to the debtor's general estate in accordance with section 8(c)(1) of SIPA, 15 U.S.C. 78fff-2(c)(1). (2) Customer property will not include: (i) Claims against the debtor for damages for any wrongdoing of the debtor, including claims for misrepresentation or fraud, or for any violation of the Act or of the regulations in this chapter; (ii) Other claims for property which are not based upon property received, acquired, or held by or for the account of the debtor, from or for the account of the customer; (iii) Forward contracts (unless such contracts are cleared by a clearing organization or, in the case of forward contracts treated as foreign futures, a foreign clearing organization); (iv) Physical delivery property that is not held by the debtor, and is delivered or received by a customer in accordance with § 190.06(a)(2) or § 190.16(a) to fulfill the customer's delivery obligation under a commodity contract; (v) Property deposited by a customer with a commodity broker after the entry of an order for relief which is not necessary to meet the margin requirements applicable to the accounts of such customer; (vi) Property hypothecated pursuant to § 1.30 of this chapter to the extent of the loan of margin with respect thereto; (vii) Money, securities, or property held to margin, guarantee or secure security futures products, or accruing as a result of such products, if held in a securities account; and (viii) Money, securities, or property held in a securities account to fulfill delivery, under a commodity contract from or for the account of a customer, as described in § 190.06(b)(2). (3) Nothing contained in this section, including, but not limited to, the satisfaction of customer claims by operation of this section, shall prevent a trustee from asserting claims against any person to recover the shortfall of property enumerated in paragraphs (a)(1)(i)(F) and (a)(1)(ii)(A) through (L) of this section. (b) Allocation of customer property between customer classes. (c) Allocation of customer property among account classes Property identified to an account class Segregated property. (ii) Excess property. (2) All other property. (i) To the estate of the account class for which, after the allocation required in paragraph (c)(1) of this section, the percentage of each public customer net equity claim which is funded is the lowest, until the funded percentage of net equity claims of such class equals the percentage of each public customer's net equity claim which is funded for the account class with the next lowest percentage of the funded claims; and then (ii) To the estate of the two account classes referred to in paragraph (c)(2)(i) of this section so that the percentage of the net equity claims which are funded for each class remains equal until the percentage of each public customer net equity claim which is funded equals the percentage of each public customer net equity claim which is funded for the account class with the next lowest percentage of funded claims, and so forth, until the percentage of each public customer net equity claim which is funded is equal for all classes of accounts; and then, (iii) Among account classes in the same proportion as the public customer net equity claims for each such account class bears to the total of public customer net equity claims of all account classes until the public customer claims of each account class are paid in full; and, thereafter, (iv) To the non-public customer estate for each account class in the same order as is prescribed in paragraphs (c)(2)(i) through (iii) of this section for the allocation of the customer estate among account classes. (d) Distribution of customer property Return or transfer of specifically identifiable property. (i) If it is margining an open commodity contract, only if substitute customer property is first deposited with the trustee with a value equal to the greater of the full fair market value of such property on the return date or the balance due on the return date on any loan by the debtor to the customer for which such property constitutes security; or (ii) If it is not margining an open commodity contract, at the option of the customer, either pursuant to the terms of paragraph (d)(1)(i) of this section, or pursuant to the following terms: Such customer first deposits substitute customer property with the trustee with a value equal to the amount by which the greater of the value of the specifically identifiable property to be transferred or returned on the date of such transfer or return or the balance due on the return date on any loan by the debtor to the customer for which such property constitutes security, together with any other disbursements made, or to be made, to such customer, plus a reasonable reserve in the trustee's sole discretion, exceeds the estimated aggregate of the funded balances for each class of account of such customer less the value on the date of its transfer or return of any property transferred or returned prior to the primary liquidation date with respect to the customer's net equity claim for such account; provided, however, (2) Transfers of specifically identifiable commodity contracts under section 766 of the Bankruptcy Code. provided, however, (3) Distribution in kind of specifically identifiable securities. i.e., (4) Proof of customer claim. (5) No differential distributions. § 190.10 Current records during business as usual. A person that is a futures commission merchant is required to maintain current records relating to its customers' accounts, including copies of all account agreements and related account documentation, and “know your customer” materials, pursuant to §§ 1.31, 1.35, 1.36, and 1.37 of this chapter, which may be provided to another futures commission merchant to facilitate the transfer of open commodity contracts or other customer property held by such person for or on behalf of its customers to the other futures commission merchant, in the event an order for relief is entered with respect to such person. Subpart C—Clearing Organization as Debtor § 190.11 Scope and purpose of this subpart. (a) This subpart applies to a proceeding commenced under subchapter IV of chapter 7 of the Bankruptcy Code in which the debtor is a clearing organization. (b) If the debtor clearing organization is organized outside the United States, and is subject to a foreign proceeding, as defined in 11 U.S.C. 101(23), in the jurisdiction in which it is organized, then only the following provisions of this part shall apply: (1) Subpart A. (2) Section 190.12. (3) Section 190.13, but only with respect to futures contracts and cleared swaps contracts cleared by FCM clearing members on behalf of their public customers and the property margining or securing such contracts. (4) Sections 190.17 and 190.18, but only with respect to claims of FCM clearing members on behalf of their public customers, as well as to property that is or should have been segregated for the benefit of FCM clearing members' public customers, or that has been recovered for the benefit of FCM clearing members' public customers. § 190.12 Required reports and records. (a) Notices Means of providing To the Commission. [email protected]. (ii) To members. (2) Of commencement of a proceeding. (b) Reports and records to be provided to the trustee and the Commission within three hours. (2) As soon as practicable following the commencement of a proceeding that is subject to this subpart and in any event no later than three hours following the commencement of such proceeding (or, with respect to the trustee, the appointment of the trustee), the debtor shall provide to the trustee and the Commission copies of the most up-to-date versions of the default management plan and default rules and procedures maintained by the debtor pursuant to § 39.16 and, as applicable, § 39.35 of this chapter. (c) Records to be provided to the trustee and the Commission by the next business day. (1) All records maintained by the debtor described in § 39.20(a) of this chapter; and (2) Any opinions of counsel or other legal memoranda provided to the debtor (whether by external or internal counsel) in the five years preceding the commencement of such proceeding relating to the enforceability of the rules and procedures of the debtor in the event of an insolvency proceeding involving the debtor. § 190.13 Prohibition on avoidance of transfers. The following transfers are approved and may not be avoided under sections 544, 546, 547, 548, 549, or 724(a) of the Bankruptcy Code: (a) Pre-relief transfers. (b) Post-relief transfers. § 190.14 Operation of the estate of the debtor subsequent to the filing date. (a) Proofs of claim. (b) Operation of the derivatives clearing organization. (c) Liquidation. (2) In lieu of liquidating securities held by the debtor and making distributions in the form of cash, the trustee may, in its reasonable discretion, make distributions in the form of securities that are equivalent ( i.e., (d) Computation of funded balance. § 190.15 Recovery and wind-down plans; default rules and procedures. (a) Prohibition on avoidance of actions taken pursuant to recovery and wind-down plans. (b) Implementation of debtor's default rules and procedures. (c) Implementation of recovery and wind-down plans. § 190.16 Delivery. (a) General. (b) Special provisions for delivery accounts. (i) Physical delivery property held in delivery accounts as of the filing date, along with the proceeds from any subsequent sale of such physical delivery property in accordance with § 190.06(a)(3) to fulfill a clearing member's or its customer's delivery obligation or any other subsequent sale of such property, as part of the physical delivery account class; and (ii) Cash delivery property in delivery accounts as of the filing date, along with any physical delivery property for which delivery is subsequently taken on behalf of a clearing member or its customer in accordance with § 190.06(a)(3), as part of the separate cash delivery account class. (2) If the debtor holds any cash or property in the form of cash equivalents in an account with a bank or other person under a name or in a manner that clearly indicates that the account holds property for the purpose of making payment for taking physical delivery, or receiving payment for making physical delivery, of a commodity under any commodity contracts, such property shall (subject to § 190.19) be considered customer property in the cash delivery account class if held for making payment for taking delivery, or in the physical delivery account class, if held for the purpose of receiving such payment. § 190.17 Calculation of net equity. (a) Net equity-separate capacities and calculations. (2) Net equity shall be calculated separately for each separate customer capacity in which the clearing member has a claim against the debtor, i.e., (b) Net equity—application of debtor's loss allocation rules and procedures. (ii) The calculation in paragraph (b)(1)(i) of this section will include, with respect to the clearing member's house account, any assessments or similar loss allocation arrangements provided for under those rules and procedures that were not called for before the filing date, or, if called for, have not been paid. Such loss allocation arrangements shall be applied to the extent necessary to address losses arising from default by clearing members. (2) Appropriate adjustments shall be made to the net equity claims of the clearing members that are so entitled under the following circumstances: Where the debtor's loss allocation rules and procedures would entitle clearing members to additional payments of cash or other property due to— (i) Portions of mutualized default resources that are prefunded, or assessed and collected, but in either event not used; or (ii) The debtor's recoveries on claims against others (including, but not limited to, recoveries on claims against clearing members who have defaulted on their obligations to the debtor). (c) Net equity—general. (d) Calculation of funded balance. Funded balance § 190.18 Treatment of property. (a) General. i.e., (b) Scope of customer property. (1) Customer property includes the following: (i) All cash, securities, or other property, or the proceeds of such cash, securities, or other property, that is received, acquired, or held by or for the account of the debtor, from or for any commodity contract account of a clearing member carried by the debtor, which is: (A) Property received, acquired, or held, in order to margin, guarantee, secure, purchase, or sell a commodity contract; (B) Open commodity contracts; (C) Physical delivery property as that term is defined in paragraphs (1) through (3) of the definition of that term in § 190.01; (D) Cash, securities or other property received by the debtor as payment for a commodity to be delivered to fulfill a commodity contract from or for the commodity customer account of a clearing member or a customer of a clearing member; (E) Profits or contractual rights accruing as a result of a commodity contract; (F) Letters of credit, including any proceeds of a letter of credit drawn upon by the trustee, or substitute customer property posted by a clearing member or a customer of a clearing member, pursuant to § 190.04(d)(3); or (G) Securities held in a portfolio margining account carried as a futures account or a cleared swaps customer account; (ii) All cash, securities, or other property which: (A) Is segregated by the debtor on the filing date for the benefit of clearing members' house accounts or clearing members' public customer accounts; (B) Was of a type described in paragraph (b)(1)(i)(A) of this section that is subsequently recovered by the avoidance powers of the trustee or is otherwise recovered by the trustee on any other claim or basis; (C) Represents a recovery of any debit balance, margin deficit or other claim of the debtor against any commodity contract account carried for the benefit of a member's house accounts or a member's public customer accounts; (D) Was unlawfully converted but is part of the debtor's estate; or (E) Was of a type described in paragraphs (a)(1)(ii)(H) through (K) of § 190.09 (as if the term debtor used therein refers to a clearing organization as debtor); (iii) Any guaranty fund deposit, assessment, or similar payment or deposit made by a clearing member, or recovered by the trustee, to the extent any remains following administration of the debtor's default rules and procedures, and any other property of a member available under the debtor's rules and procedures to satisfy claims made by or on behalf of public customers of a member; and (iv) Amounts of its own funds that the debtor had committed as part of its loss allocation rules, to the extent that such amounts have not already been applied under such rules. (2) Customer property will not include property of the type described in § 190.09(a)(2), as if the term debtor used therein refers to a clearing organization and to the extent relevant to a clearing organization. (c) Allocation of customer property between customer classes. (i) Any excess should be allocated to customer property other than member property to the extent that the funded balance is less than one hundred percent of net equity claims for members' public customers in any account class; and (ii) Any remaining excess after the application of paragraph (c)(1)(i) of this section should be allocated to member property to the extent that the funded balance is less than one hundred percent of net equity claims for members' house accounts in any other account class. (2) Where the funded balance for members' public customers in any account class is greater than one hundred percent: (i) Any excess should be allocated to customer property other than member property to the extent that the funded balance is less than one hundred percent of net equity claims for members' public customers in any other account class; and (ii) Any remaining excess after the application of paragraph (c)(2)(i) of this section should be allocated to member property to the extent that the funded balance is less than one hundred percent of net equity claims for members' house accounts in any account class. (d) Allocation of customer property among account classes Segregated property. (2) All other property. (i) To the estate of the account class for which the percentage of each members' net equity claim which is funded is the lowest, until the funded percentage of net equity claims of such account class equals the percentage of each members' net equity claim which is funded for the account class with the next lowest percentage of the funded claims; and then (ii) To the estate of the two account classes so that the percentage of the net equity claims which are funded for each such account class remains equal until the percentage of each net equity claim which is funded equals the percentage of each net equity claim which is funded for the account class with the next lowest percentage of funded claims, and so forth, until all account classes within the customer class are fully funded. (e) Accounts without separation by account class. (f) Assertion of claims by trustee. § 190.19 Support of daily settlement. (a) Notwithstanding any other provision of this part, funds received (whether from clearing members' house or customer accounts) by a debtor clearing organization as part of the daily settlement required pursuant to § 39.14 of this chapter shall, upon and after an order for relief, be included as customer property that is reserved for and traceable to, and promptly shall be distributed to, members entitled to payments of such funds with respect to such members' house and customer accounts as part of that same daily settlement. Such funds when received, other than deposits of initial margin described in § 39.14(a)(1)(iii) of this chapter, shall be considered member property and, separately, customer property other than member property, in proportion to the ratio of total gains in member accounts with net gains, and total gains in clearing members' customer accounts with net gains, respectively. Deposits of initial margin described in § 39.14(a)(1)(iii) of this chapter shall be considered member property and, separately, customer property other than member property, to the extent deposited on behalf of, respectively, clearing members' house accounts and customer accounts. (b) To the extent there is a shortfall in funds received pursuant to paragraph (a) of this section: (1) Such funds shall be supplemented with the property described in paragraphs (b)(1)(i) through (iv) of this section, as applicable, to the extent necessary to meet the shortfall, in accordance with the derivatives clearing organization's default rules and procedures adopted pursuant to § 39.16 and, as applicable, § 39.35 of this chapter, and (with respect to paragraph (b)(1)(ii) of this section) any recovery and wind-down plans maintained pursuant to § 39.39 of this chapter and submitted pursuant to § 39.19 of this chapter. Such funds shall be included as member property and customer property other than member property in the proportion described in paragraph (a) of this section, and shall be distributed promptly to members' house accounts and members' customer accounts which accounts are entitled to payment of such funds as part of that daily settlement. (i) Initial margin held for the account of a member, including initial margin segregated for the customers of such member, that has defaulted on payments required pursuant to a daily settlement, but only to the extent that such margin is permitted to be used pursuant to parts 1, 22, and 30 of this chapter. (ii) Assets of the debtor, to the extent dedicated to such use as part of the debtor's default rules and procedures, and any recovery and wind-down plans, described in this paragraph (b)(1). (iii) Prefunded guarantee or default funds maintained pursuant to the debtor's default rules and procedures. (iv) Payments made by members pursuant to assessment powers maintained pursuant to the debtor's default rules and procedures. (2) If the funds that are included as customer property pursuant to paragraph (a) of this section, supplemented as described in paragraph (b)(1) of this section, are insufficient to pay in full members entitled to payment of such funds as part of daily settlement, then such funds shall be distributed pro rata to such members' house accounts and customer accounts in proportion to the ratio of total gains in member accounts with net gains, and total gains in customer accounts with net gains, respectively. Appendix A to Part 190—Customer Proof of Claim Form Appendix B to Part 190—Special Bankruptcy Distributions Framework 1—Special Distribution of Customer Funds When the Cross-Margining Account Is a Futures Account (a) This framework 1 applies when a debtor futures commission merchant has participated in a cross-margining (“XM”) program for futures and securities under which the cross-margined positions of its futures customers (as defined in § 1.3 of this chapter) and the property received to margin, secure or guarantee such positions are held in one or more accounts pursuant to a Commission order that requires such positions and property to be segregated, pursuant to section 4d(a) of the Act, from the positions and property of: (1) The futures commission merchant; (2) If applicable, any affiliate carrying the securities positions as a participant in the XM program (“Affiliate”); and (3) Other futures customers of the futures commission merchant (such segregated accounts, the “XM accounts”). (b) The futures commission merchant may, and any Affiliate that holds the securities positions in an XM account that it directly carries will, be registered as a broker-dealer under the Exchange Act. The Commission order approving the XM program may limit participating customers to market professionals and will require a participating customer to sign an agreement, in a form approved by the Commission, that refers to this distributional rule. (c) A futures commission merchant is deemed to receive securities held in an XM account, including securities and other property held by an Affiliate in an XM account, as “futures customer funds” (as defined in § 1.3 of this chapter) that margin, guarantee or secure commodity contracts in the XM account (or paired XM accounts at the futures commission merchant and an Affiliate). Under the agreement signed by the customer, in the event that the futures commission merchant (or Affiliate) is the subject of a SIPA proceeding, the customer agrees that securities in an XM account are excluded from the securities estate for purposes of SIPA, and that its claim for return of the securities will not be treated as a customer claim under SIPA. These restrictions apply to the customer only, and should not be read to limit any action that the trustee may take to seek recovery of property in an XM account carried by an Affiliate as part of the customer estate of the futures commission merchant. (d) XM accounts, and other futures accounts that are subject to segregation under section 4d(a) of the Act (pursuant to the Commission's regulations in part 1 of this chapter) (“non-XM accounts”), are treated as two subclasses of futures account with two separate pools of segregated futures customer property, an XM pool and a non-XM pool, each of which constitutes a segregated pool under section 4d(a) of the Act. If the futures commission merchant has participated in multiple XM programs, the XM accounts in the different programs are combined and treated as part of the same XM subclass of futures accounts. A futures customer could hold both non-XM and XM accounts. (e) Customer claims under this part arising out of the XM subclass of accounts are subordinated to customer claims arising out of the non-XM subclass of accounts in certain circumstances in which the futures commission merchant does not meet its segregation requirements. The segregation requirement is the amount of futures customer funds that the futures commission merchant is required by the Act and Commission regulations in part 1 of this chapter or Commission orders to hold on deposit in segregated accounts on behalf of its futures customers (exclusive of its targeted residual amount obligations pursuant to § 1.3 of this chapter). (f)(1) If there is a shortfall in the non-XM pool and no shortfall in the XM pool, all customer net equity claims, whether or not they arise out of the XM subclass of accounts, will be combined and paid pro rata out of the combined XM and non-XM pools of futures customer property. (2) If there is a shortfall in the XM pool and no shortfall in the non-XM pool, customer net equity claims arising from the XM subclass of accounts must be satisfied first from the XM pool, and customer net equity claims arising from the non-XM subclass of accounts must be satisfied first from the non-XM pool. (3) If there is a shortfall in both the non-XM and XM pools: (i) If the non-XM shortfall as a percentage of the segregation requirement for the non-XM pool is greater than or equal to the XM shortfall as a percentage of the segregation requirement for the XM pool, all customer net equity claims will be paid pro rata out of the combined XM and non-XM pools of futures customer property; and (ii) If the XM shortfall as a percentage of the segregation requirement for the XM pool is greater than the non-XM shortfall as a percentage of the segregation requirement for the non-XM pool, non-XM customer net equity claims will be paid pro rata out of the available non-XM pool, and XM customer net equity claims will be paid pro rata out of the available XM pool. (4) In this way, non-XM customers will never be adversely affected by an XM shortfall. (g) The following examples illustrate the operation of this framework 1. The examples assume that the FCM has two futures customers, one with exclusively XM accounts and one with exclusively non-XM accounts. Framework 2—Special Allocation of Shortfall to Customer Claims When Customer Funds for Futures Contracts and Cleared Swaps Customer Collateral are Held in a Depository Outside of the United States or in a Foreign Currency The Commission has established the following allocation convention with respect to futures customer funds (as § 1.3 of this chapter defines such term) and Cleared Swaps Customer Collateral (as § 22.1 of this chapter defines such term) (both of which are customer funds (as § 1.3 of this chapter defines such term) that are segregated pursuant to the Act and Commission rules thereunder), which applies in certain circumstances when futures customer funds or Cleared Swaps Customer Collateral are held by a futures commission merchant in a depository outside the United States (“U.S.”) or in a foreign currency. If a futures commission merchant enters into bankruptcy and maintains futures customer funds or Cleared Swaps Customer Collateral in a depository outside the U.S. or in a depository located in the U.S. in a currency other than U.S. dollars, the trustee shall use the following allocation procedures to calculate the claim of each public customer in the futures account class or each public customer in the cleared swaps account class, as applicable, when a sovereign action of a foreign government or court has occurred that contributes to shortfalls in the amounts of futures customer funds or Cleared Swaps Customer Collateral. In the event a sovereign action creates or contributes to a shortfall in customer property, applying the allocation convention will result in a reallocation of distributions of futures customer funds or Cleared Swaps Collateral to take into account the impact of the sovereign action. For purposes of this bankruptcy convention, sovereign action of a foreign government or court would include, but not be limited to, the application or enforcement of statutes, rules, regulations, interpretations, advisories, decisions, or orders, formal or informal, by a Federal, state, or provincial executive, legislature, judiciary, or government agency. The trustee should perform the allocation procedures separately with respect to each public customer in the futures account class or cleared swaps account class.

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