[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: 17CFR190.06]

[Page 621-623]
 
              TITLE 17--COMMODITY AND SECURITIES EXCHANGES
 
             CHAPTER I--COMMODITY FUTURES TRADING COMMISSION
 
PART 190_BANKRUPTCY--Table of Contents
 
Sec.  190.06  Transfers.

    (a) Transfer rules. No self-regulatory organization or clearing 
organization may adopt, maintain in effect or enforce rules which:
    (1) Are inconsistent with the provisions of this part;
    (2) Interfere with the acceptance by its members of open commodity 
contracts and the equity margining or securing such contracts from 
futures commission merchants, or persons which are required to be 
registered as futures commission merchants, which are required to 
transfer accounts pursuant to Sec.  1.17(a)(4) of this chapter; or
    (3) Prevent the acceptance by its members of transfers of open 
commodity contracts and the equity margining or securing such contracts 
from futures commission merchants with respect to which a petition in 
bankruptcy has been filed, if such transfers have been approved by the 
Commission.

Provided, however, That this paragraph shall not limit the exercise of 
any contractual right of a self-regulatory organization or clearing 
organization to liquidate open commodity contracts.
    (b) Notice. Unless notice has been filed pursuant to Sec.  1.65(b) 
of this chapter, if a futures commission merchant, or a person required 
to be registered as a futures commission merchant, intends to transfer 
commodity contracts held by or for a commodity broker from or for the 
account of a customer to another person registered as a futures 
commission merchant after a petition in bankruptcy has been filed by or 
against such commodity broker, the transferor must notify the Commission 
no later than is required under Sec.  190.02(a)(2).
    (c) Financial requirements for transferees. (1) No transfer may be 
made which would cause the transferee to be in violation of the minimum 
financial requirements set forth in this chapter.
    (2) A transferee may accept a transfer of open commodity contracts 
even though the money, securities and other property eligible for 
transfer under the regulations contained in this part is insufficient to 
fully margin such positions, if the transferee agrees to accept the 
transfer subject to any loss due to the failure to recover such 
deficiency from the customers whose contracts it has accepted or from 
the estate of the debtor.
    (3) The transferee of a commodity contract for which notice is given 
under Sec.  190.06(b)(2) must keep that contract open one business day 
after its 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 contract and the 
margin which such transferee would require with respect to a similar 
commodity contract held for the account of a customer in the ordinary 
course of business.
    (4) No commission may be collected by the transferor with respect to 
the transfer of an open commodity contract for which notice is given 
under Sec.  190.06(b)(2).
    (d) Customer instructions--(1) Customer instructions. A commodity 
broker must provide an opportunity for each customer to specify when 
undertaking its first hedging contract whether, in the event of 
bankruptcy, such customer prefers that open commodity contracts held in 
a hedging account be liquidated

[[Page 622]]

by the trustee without seeking customer instructions. Such commodity 
broker may obtain evidence of the customer instructions as provided in 
Sec.  1.55(d) of this chapter.
    (2) Record of customer instructions. Each futures commission 
merchant must indicate prominently in the accounting records in which it 
maintains open trade balances any customer accounts which are hedging 
accounts for which the customer has not specified that it prefers open 
contracts to be liquidated in bankruptcy by the trustee without 
instruction.
    (e) Eligibility for transfer under section 764(b) of the Bankruptcy 
Code--(1) Accounts eligible for transfer. Subject to the requirements of 
paragraph (e)(2) of this section, all accounts are eligible for transfer 
after the filing date pursuant to section 764(b) of the Bankruptcy Code, 
except:
    (i) House accounts or the accounts of general partners of the debtor 
if the debtor is a partnership;
    (ii) Leverage accounts, if the debtor is the leverage transaction 
merchant with respect to such accounts;
    (iii) Dealer option accounts, if the debtor is the dealer option 
grantor with respect to such accounts;
    (iv) Accounts which contain no open commodity contracts; or
    (v) Accounts which are in deficit.
    (2) Amount of equity which may be transferred. In no case may money, 
securities or property be transferred in respect of any eligible account 
if the value of such money, securities or property would exceed the 
funded balance of such account based on available information as of the 
close of business on the business day immediately preceding transfer 
less the value on the date of return or transfer of any property 
previously returned or transferred with respect thereto.
    (f) Special rules for transfers under section 764(b) of the 
Bankruptcy Code--(1) Dealer options--(i) Eligibility for transfer. Prior 
to exercise, any dealer option contract held by or for the account of a 
debtor which is a futures commission merchant from or for the account of 
a customer may be transferred even if the funded balance available for 
transfer which is attributable to such contract does not equal 100% of 
the portion of the purchase price required to be segregated with respect 
to such contract: Provided, That a dealer option contract will be 
eligible for transfer only if any deficiency in the funded balance of 
the customer account in which it is held is not due to amounts owed by 
such customer to the debtor; and, Provided further, That the transferee 
of any dealer option contract need not segregate more than an amount 
equal to that portion of the purchase price due the grantor which is 
transferred with the contract which should be equal to the grantor's 
funded balance in the portion of the purchase price segregated less any 
reasonable reserve established by the trustee for the nonrecovery of 
overpayments.
    (ii) Obligation of the dealer option grantor. In the event of the 
transfer of a dealer option contract pursuant to this section, the 
failure of the debtor futures commission merchant to segregate 100% of 
the purchase price due the grantor for such contract, or the failure of 
the dealer option grantor to collect 100% of such purchase price due the 
grantor, shall not excuse the dealer option grantor from its obligation 
to perform such contract in full upon its exercise, without any setoff 
or set aside for the premium deficiency.
    (2) Clearing organizations. Commodity contracts held by a clearing 
organization which is a debtor may not be transferred.
    (3) Partial transfers--(i) Of the customer estate. If all eligible 
customer accounts held by a debtor cannot be transferred under this 
section, a partial transfer may nonetheless be made. The Commission will 
not disapprove such a transfer for the sole reason that it was a partial 
transfer if it would prefer the transfer of accounts, the liquidation of 
which could adversely affect the market or the bankrupt estate. Any 
dealer option contract held by or for the account of a debtor which is a 
futures commission merchant from or for the account of a customer which 
has not previously been transferred, and is eligible for transfer, must 
be transferred on or before the close of business on the tenth business 
day after entry of the order for relief.
    (ii) Of a customer account. If all of a customer's open commodity 
contracts

[[Page 623]]

cannot be transferred under this section, a partial transfer of 
contracts may be made. A partial transfer may be effected by liquidating 
that portion of the open commodity contracts held by a customer which 
represents sufficient equity to permit the transfer of the remainder. If 
any commodity contracts to be transferred in a partial transfer are part 
of a spread or straddle, both sides of such spread or straddle must be 
transferred or neither side may be transferred.
    (g) Prohibition on avoidance of transfers under section 764(b) of 
the Bankruptcy Code--(1) Pre-relief transfers. Notwithstanding the 
provisions of paragraph (e) of this section, the following transfers may 
not be avoided by a trustee:
    (i) The transfer of commodity accounts prior to the entry of the 
order for relief in compliance with Sec.  1.17(a)(4) of this chapter 
unless such transfer is disapproved by the Commission; or
    (ii) The transfer prior to the order for relief by a public 
customer, including a transfer by a public customer which is a commodity 
broker, of commodity accounts 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 the bankrupt estate than that to 
which it would be entitled in a bankruptcy distribution; or
    (B) The transfer is disapproved by the Commission.
    (2) Post-relief transfers. On or after the entry of the order for 
relief, the following transfers to one or more transferees may not be 
avoided by the trustee:
    (i) The transfer of a customer account eligible to be transferred 
under paragraph (e) or (f) of this section made by the trustee of the 
commodity broker or by any self-regulatory organization or clearing 
organization of the commodity broker:
    (A) On or before the close of business on the fourth business day 
after the entry of the order for relief; and
    (B) The Commission is notified in accordance with Sec.  190.02(a)(2) 
prior to the transfer and does not disapprove the transfer; or
    (ii) The transfer of a customer account at the direction of the 
Commission on or before the close of business on the fourth business day 
after the order for relief upon such terms and conditions as the 
Commission may deem appropriate and in the public interest.
    (3) Withdrawals prior to bankruptcy. The withdrawal or settlement of 
a commodity account by a public customer including a public customer 
which is a commodity broker, prior to the filing date may not be avoided 
by a trustee unless:
    (i) The customer making the withdrawal or settlement acted in 
collusion with the debtor or its principals to obtain a greater share of 
the bankruptcy estate than that to which such customer would be entitled 
in a bankruptcy distribution; or
    (ii) The withdrawal or settlement is disapproved by the Commission.
    (h) Commission action. Notwithstanding any other provision of this 
section, in appropriate cases and to protect the public interest, the 
Commission may:
    (1) Prohibit the transfer of customer accounts; or
    (2) Permit transfers of accounts which do not comply with the 
requirements of this section.

[48 FR 8739, Mar. 1, 1983; 48 FR 15122 and 15123, Apr. 7, 1983; 58 FR 
17505, Apr. 5, 1993]