[Code of Federal Regulations] [Title 17, Volume 1] [Revised as of April 1, 2006] From the U.S. Government Printing Office via GPO Access [CITE: 17CFR190.04] [Page 618-620] TITLE 17--COMMODITY AND SECURITIES EXCHANGES CHAPTER I--COMMODITY FUTURES TRADING COMMISSION PART 190_BANKRUPTCY--Table of Contents Sec. 190.04 Operation of the debtor's estate--general. (a) Compliance with the Act and regulations. Except as specifically provided otherwise in this part, the trustee shall comply with all of the provisions of the Act and of the regulations thereunder as if it were the debtor. (b) Computation of funded balance. Using the information available, the trustee must compute a funded balance for each customer account which contains open commodity contracts as of the close of business each day subsequent to the order for relief until the final liquidation date. Such computation must be completed prior to noon on the next business day. (c) Records--(1) Maintenance. Subject to the requirements of the Bankruptcy Code, records of the computations required by this part shall be maintained in accordance with Sec. 1.31 of this chapter by the trustee for the greater of the period required by Sec. 1.31 of this chapter or for a period of one year after the close [[Page 619]] of the bankruptcy proceeding for which they were compiled. (2) Accessibility. The records required to be maintained by paragraph (c)(1) of this section shall be available during business hours to the Court, parties in interest, the Commission and the U.S. Department of Justice. At any time on or after the filing date, the commodity broker, or the trustee if a trustee has been appointed, shall be required to give the Commission and the U.S. Department of Justice immediate access to all records of the debtor, including records required to be retained in accordance with Sec. 1.31 of this chapter and all other records of the commodity broker, whether or not the Act or this chapter would require such records to be maintained by the commodity broker. (d) Liquidation--(1) Order of liquidation--(i) Open outcry. Liquidation of open commodity contracts held for a house or a customer account by or on behalf of a commodity broker which is a debtor shall be accomplished in accordance with Sec. 1.38 of this chapter: Provided, That to the extent reasonably possible the trustee shall first liquidate all net positions and shall subsequently liquidate all long and short positions in the same commodity in the same delivery month on the same contract market in tandem: and, Provided further, That any covered commodity owned by a debtor shall be liquidated, to the extent reasonably possible, at the same time as its cover. (ii) Book entry. Notwithstanding paragraph (1), in appropriate cases, upon application by the trustee or the affected clearing organization, the Commission may permit offsetting open commodity contracts to be liquidated, or settlement on such contracts to be made, by book entry. Such book entry shall offset such trades on the books of the commodity broker using an execution price equal to the weighted average of the liquidation prices for contracts in the same commodity for the same delivery month on the same contract market which are not matched on the books of the commodity broker, or if there are no such unmatched contracts, using the average of the opening price and the settlement price of contracts in the same commodity for the same delivery month on the same contract market as of the close of business on the market day of the order for relief. (2) Liquidation only. Nothing in this part shall be interpreted to permit the trustee to purchase or sell new commodity contracts for customers of the debtor except to offset open commodity contracts or to transfer any transferable notice received by the debtor or the trustee under any commodity contract: Provided, however, That the trustee may, in its discretion and with approval of the Commission, cover uncovered inventory or commodity contracts of the debtor which cannot be liquidated immediately because of price limits or other market conditions, or may take an offsetting position in a new month or at a strike price for which limits have not been reached. (e) Other matters--(1) Determination as to bona fide hedges. In determining which commodity contracts are eligible to be held open for transfer pursuant to customer instruction, the trustee may rely on the designation in the accounting records of the commodity broker that the account for or on behalf of which the contract is held is a hedging account. Commodity contracts maintained in a hedging account may be treated by the trustee as specifically identifiable. (2) Disbursements. The trustee shall make no disbursements to customers prior to final distribution except with approval of the court or in accordance with Sec. 190.08(d). (3) Investment. The trustee shall promptly invest the equity resulting from the liquidation of commodity contracts, and the proceeds of the liquidation of specifically identifiable property, in obligations of the United States and obligations fully guaranteed as to principal and interest by the United States, and may similarly invest any customer equity in accounts which remain open in accordance with Sec. 190.03: Provided, That such obligations are maintained in a depository located in the United States, its territories or possessions. (4) Margin calls--reasonable time. Except as otherwise provided in this part, a reasonable time for meeting margin [[Page 620]] calls made by the trustee shall be deemed to be one hour, or such greater period not to exceed one business day, as the trustee may determine in its sole discretion. (5) Management of Long Option Contracts. Subject to the applicable liquidation provisions the trustee must use its best efforts to assure that a long option contract with value does not expire worthless. (Secs. 2(a), 4c, 4d, 4g, 5, 5a, 8a, 15, 19 and 20 of the Commodity Exchange Act, as amended by the Futures Trading Act of 1982, Pub. L. 97- 444, 96 Stat. 2294 (1983), 7 U.S.C. 2 and 4a, 6c, 6d, 6g, 7, 7a, 12a, 19, 23 and 24 (1976 & Supp. V. 1981 and Pub. L. 97-444); secs. 761-766 of the Bankruptcy Reform Act of 1978, as amended by the Bankruptcy Act Amendments, Pub. L. 97-222, 96 Stat. 235 (1982), 11 U.S.C. 761-766 (Supp. V. 1981 as amended by Pub. L. 97-222)) [48 FR 8739, Mar. 1, 1983, as amended at 48 FR 28980, June 24, 1983]