How does one go bankrupt? Two ways — gradually and then suddenly.
(Paraphrase of Hemingway, by way of CFTC Chairman Heath Tarbert)
On April 14, 2020, the U.S. Commodity Futures Trading Commission (CFTC) unanimously approved a proposal to rewrite the CFTC’s Part 190 bankruptcy rules (the Proposal), which were first adopted in 1983 and have not been comprehensively revised since then. Part 190, along with Subchapter IV of Chapter 7 of the Bankruptcy Code (the Code), govern the distribution of assets in a bankruptcy of a futures commission merchant (FCM) or derivatives clearing organization (DCO). The proposal is the result of several years of work by the CFTC staff and a subcommittee of the American Bar Association.
The Proposal is not related to the current market turmoil caused by the COVID-19 pandemic. The comment period for the Proposal is short, given its complexity. Comments are due by July 13, 2020. Final rules may be issued this year. The CFTC is not required to address any comments submitted after July 13, although several CFTC Commissioners indicated that the CFTC would attempt to take into consideration late comments.
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