The Bankruptcy Code limits in many ways the rights of nondebtors under contracts with a debtor in bankruptcy. There are, however, some crucial exceptions, which Congress deemed important for the orderly function of the securities markets. In particular, agreements governing securities repurchase (or repo) transactions involving a financial institution may be terminated and liquidated notwithstanding the bankruptcy filing of the repo seller.

On Jan. 17, the U.S. Court of Appeals for the Second Circuit vacated the decision of the District Court for the Southern District of New York in Marblegate Asset Management, LLC v.