In an interpretive statement, the Commodity Futures Trading Commission has taken the position that “cleared-only contracts,” over-the-counter contracts submitted for clearing through a futures commission merchant to a derivatives clearing organization, should be included within the definition of “net equity” for purposes of U.S. Bankruptcy Code provisions applicable to commodity brokers. The CFTC’s interpretation generally would treat cleared-only contracts in the same manner as exchange-traded futures contracts in the event of a futures commission merchant bankruptcy.

Introduction

On 25 July 2008, HM Treasury published a Consultation Paper entitled Modernising the insolvency protections for the operation of financial markets - proposals to reform Part 7 of the 1989 Companies Act (the Consultation Paper).

Proposals