CFTC Adopts Amendment Regarding the Operation of a Commodity Broker in Bankruptcy

The Commodity Futures Trading Commission (CFTC) today announced that it adopted an amendment to its regulations regarding the operation of a commodity broker in bankruptcy. Under appropriate circumstances, as determined by the Commission, the amendment would permit the trustee of a commodity broker in bankruptcy to operate the business of such commodity broker in the ordinary course, including entering into new commodity contracts on behalf of customers.

Currently, Regulation 190.04(d)(2) prohibits a bankruptcy trustee, immediately upon the commencement of the commodity broker’s bankruptcy case, from processing any new trades on behalf of customers (with limited exceptions). This amendment is intended to more fully protect customers of a bankrupt commodity broker in cases where a transfer may be practicable: e.g., where customer property in segregation is sufficient, and where the commodity broker has sufficient capital to operate. Moreover, it permits customers to manage their accounts during the bankruptcy.

The amendment will become effective 30 days after publication in the Federal Register. Copies of the regulation may be obtained by contacting the CFTC's Office of the Secretariat, Three Lafayette Centre, 1155 21st Street, NW, Washington, DC 20581, 202-418-5100, or by accessing the CFTC's website, www.cftc.gov.

Last Updated: July 29, 2010

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