{"identifier":"/us/usc/t12/s4402","title":12,"num":"\u00a7\u202f4402.","heading":"Definitions","text":"\u00a7\u202f4402.\nDefinitions\nFor purposes of this subchapter\u2014\n(1)\nBroker or dealer\nThe term \u201cbroker or dealer\u201d means\u2014\n(A) any company that is registered or licensed under Federal or State law to engage in the business of brokering, underwriting, or dealing in securities in the United States; and\n(B) to the extent consistent with this title,\n1\n1 See References in Text note below.\n(2)\nClearing organization\nThe term \u201cclearing organization\u201d means a clearinghouse, clearing association, clearing corporation, or similar organization\u2014\n(A) that provides clearing, netting, or settlement services for its members and\u2014\n(i) in which all members other than the clearing organization itself are financial institutions or other clearing organizations; or\n(ii) which is registered as a clearing agency under the Securities Exchange Act of 1934 [\n15 U.S.C. 78a\n(B) that is registered as a derivatives clearing organization under\nsection 7a\u20131 of title 7\nsection 6(c)(1) of title 7\n1\n(3)\nCovered clearing obligation\nThe term \u201ccovered clearing obligation\u201d means an obligation of a member of a clearing organization to make payment to another member of a clearing organization, subject to a netting contract.\n(4)\nCovered contractual payment entitlement\nThe term \u201ccovered contractual payment entitlement\u201d means\u2014\n(A) an entitlement of a financial institution to receive a payment, subject to a netting contract from another financial institution; and\n(B) an entitlement of a member of a clearing organization to receive payment, subject to a netting contract, from another member of a clearing organization of a covered clearing obligation.\n(5)\nCovered contractual payment obligation\nThe term \u201ccovered contractual payment obligation\u201d means\u2014\n(A) an obligation of a financial institution to make payment, subject to a netting contract to another financial institution; and\n(B) a covered clearing obligation.\n(6)\nDepository institution\nThe term \u201cdepository institution\u201d means\u2014\n(A) a depository institution as defined in section 19(b)(1)(A) of the Federal Reserve Act [\n12 U.S.C. 461(b)(1)(A)\n(B) an uninsured national bank or an uninsured State bank that is a member of the Federal Reserve System, if the national bank or State member bank is not eligible to make application to become an insured bank under\nsection 1815 of this title\n(C) a branch or agency of a foreign bank, a foreign bank and any branch or agency of the foreign bank, or the foreign bank that established the branch or agency, as those terms are defined in section 1(b) of the International Banking Act of 1978 [\n12 U.S.C. 3101\n(D) a corporation chartered under section 25(a)\n1\n12 U.S.C. 611\n(E) a corporation having an agreement or undertaking with the Board of Governors of the Federal Reserve System under section 25 of the Federal Reserve Act [\n12 U.S.C. 601\n(7)\nFailed financial institution\nThe term \u201cfailed financial institution\u201d means a financial institution that\u2014\n(A) fails to satisfy a covered contractual payment obligation when due;\n(B) has commenced or had commenced against it insolvency, liquidation, reorganization, receivership (including the appointment of a receiver), conservatorship, or similar proceedings; or\n(C) has generally ceased to meet its obligations when due.\n(8)\nFailed member\nThe term \u201cfailed member\u201d means any member that\u2014\n(A) fails to satisfy a covered clearing obligation when due,\n(B) has commenced or had commenced against it insolvency, liquidation, reorganization, receivership (including the appointment of a receiver), conservatorship, or similar proceedings, or\n(C) has generally ceased to meet its obligations when due.\n(9)\nFinancial institution\nThe term \u201cfinancial institution\u201d means a broker or dealer, a depository institution, a futures commission merchant, or any other institution as determined by the Board of Governors of the Federal Reserve System.\n(10)\nFutures commission merchant\nThe term \u201cfutures commission merchant\u201d means a company that is registered or licensed under Federal law to engage in the business of selling futures and options in commodities.\n(11)\nMember\nThe term \u201cmember\u201d means a member of or participant in a clearing organization, and includes the clearing organization and any other clearing organization with which such clearing organization has a netting contract.\n(12)\nNet entitlement\nThe term \u201cnet entitlement\u201d means the amount by which the covered contractual payment entitlements of a financial institution or member exceed the covered contractual payment obligations of the institution or member after netting under a netting contract.\n(13)\nNet obligation\nThe term \u201cnet obligation\u201d means the amount by which the covered contractual payment obligations of a financial institution or member exceed the covered contractual payment entitlements of the institution or member after netting under a netting contract.\n(14)\nNetting contract\n(A)\nIn general\nThe term \u201cnetting contract\u201d\u2014\n(i) means a contract or agreement between 2 or more financial institutions, clearing organizations, or members that provides for netting present or future payment obligations or payment entitlements (including liquidation or close out values relating to such obligations or entitlements) among the parties to the agreement; and\n(ii) includes the rules of a clearing organization.\n(B)\nInvalid contracts not included\nThe term \u201cnetting contract\u201d does not include any contract or agreement that is invalid under or precluded by Federal law.\n(15)\nPayment\nThe term \u201cpayment\u201d means a payment of United States dollars, another currency, or a composite currency, and a noncash delivery, including a payment or delivery to liquidate an unmatured obligation.","url":"https://projectusc.org/usc/t12/s4402.html","content":[{"t":"sec","id":"/us/usc/t12/s4402","children":[{"t":"num","text":"\u00a7\u202f4402."},{"t":"heading","text":"Definitions","tail":"\n"},{"t":"chapeau","text":"For purposes of this subchapter\u2014"},{"t":"para","id":"/us/usc/t12/s4402/1","children":[{"t":"num","text":"(1)"},{"t":"heading","text":"Broker or dealer"},{"t":"chapeau","text":"The term \u201cbroker or dealer\u201d means\u2014"},{"t":"subpara","id":"/us/usc/t12/s4402/1/A","children":[{"t":"num","text":"(A)"},{"t":"content","text":" any company that is registered or licensed under Federal or State law to engage in the business of brokering, underwriting, or dealing in securities in the United States; and","tail":"\n"}],"tail":"\n"},{"t":"subpara","id":"/us/usc/t12/s4402/1/B","children":[{"t":"num","text":"(B)"},{"t":"content","text":" to the extent consistent with this title,","children":[{"t":"ref","text":"1"},{"t":"num","text":"1","tail":"\u202fSee References in Text note below."},{"t":"text","text":"\u202fSee References in Text note below.","tail":" as determined by the Board of Governors of the Federal Reserve System, any company that is an affiliate of a company described in subparagraph (A) and that is engaged in the business of entering into netting contracts."}],"tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"para","id":"/us/usc/t12/s4402/2","children":[{"t":"num","text":"(2)"},{"t":"heading","text":"Clearing organization"},{"t":"chapeau","text":"The term \u201cclearing organization\u201d means a clearinghouse, clearing association, clearing corporation, or similar organization\u2014"},{"t":"subpara","id":"/us/usc/t12/s4402/2/A","children":[{"t":"num","text":"(A)"},{"t":"chapeau","text":" that provides clearing, netting, or settlement services for its members and\u2014"},{"t":"clause","id":"/us/usc/t12/s4402/2/A/i","children":[{"t":"num","text":"(i)"},{"t":"content","text":" in which all members other than the clearing organization itself are financial institutions or other clearing organizations; or","tail":"\n"}],"tail":"\n"},{"t":"clause","id":"/us/usc/t12/s4402/2/A/ii","children":[{"t":"num","text":"(ii)"},{"t":"content","text":" which is registered as a clearing agency under the Securities Exchange Act of 1934 [","children":[{"t":"ref","text":"15 U.S.C. 78a","href":"/us/usc/t15/s78a","tail":" et seq.], or is exempt from such registration by order of the Securities and Exchange Commission; or"}],"tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"subpara","id":"/us/usc/t12/s4402/2/B","children":[{"t":"num","text":"(B)"},{"t":"content","text":" that is registered as a derivatives clearing organization under ","children":[{"t":"ref","text":"section 7a\u20131 of title 7","href":"/us/usc/t7/s7a\u20131","tail":", that has been granted an exemption under "},{"t":"ref","text":"section 6(c)(1) of title 7","href":"/us/usc/t7/s6/c/1","tail":", or that is a multilateral clearing organization (as defined in section 4421\u202f"},{"t":"text","text":"1","tail":" of this title)."}],"tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"para","id":"/us/usc/t12/s4402/3","children":[{"t":"num","text":"(3)"},{"t":"heading","text":"Covered clearing obligation"},{"t":"content","children":[{"t":"p","text":"The term \u201ccovered clearing obligation\u201d means an obligation of a member of a clearing organization to make payment to another member of a clearing organization, subject to a netting contract.","tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"para","id":"/us/usc/t12/s4402/4","children":[{"t":"num","text":"(4)"},{"t":"heading","text":"Covered contractual payment entitlement"},{"t":"chapeau","text":"The term \u201ccovered contractual payment entitlement\u201d means\u2014"},{"t":"subpara","id":"/us/usc/t12/s4402/4/A","children":[{"t":"num","text":"(A)"},{"t":"content","text":" an entitlement of a financial institution to receive a payment, subject to a netting contract from another financial institution; and","tail":"\n"}],"tail":"\n"},{"t":"subpara","id":"/us/usc/t12/s4402/4/B","children":[{"t":"num","text":"(B)"},{"t":"content","text":" an entitlement of a member of a clearing organization to receive payment, subject to a netting contract, from another member of a clearing organization of a covered clearing obligation.","tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"para","id":"/us/usc/t12/s4402/5","children":[{"t":"num","text":"(5)"},{"t":"heading","text":"Covered contractual payment obligation"},{"t":"chapeau","text":"The term \u201ccovered contractual payment obligation\u201d means\u2014"},{"t":"subpara","id":"/us/usc/t12/s4402/5/A","children":[{"t":"num","text":"(A)"},{"t":"content","text":" an obligation of a financial institution to make payment, subject to a netting contract to another financial institution; and","tail":"\n"}],"tail":"\n"},{"t":"subpara","id":"/us/usc/t12/s4402/5/B","children":[{"t":"num","text":"(B)"},{"t":"content","text":" a covered clearing obligation.","tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"para","id":"/us/usc/t12/s4402/6","children":[{"t":"num","text":"(6)"},{"t":"heading","text":"Depository institution"},{"t":"chapeau","text":"The term \u201cdepository institution\u201d means\u2014"},{"t":"subpara","id":"/us/usc/t12/s4402/6/A","children":[{"t":"num","text":"(A)"},{"t":"content","text":" a depository institution as defined in section 19(b)(1)(A) of the Federal Reserve Act [","children":[{"t":"ref","text":"12 U.S.C. 461(b)(1)(A)","href":"/us/usc/t12/s461/b/1/A","tail":"] (other than clause (vii));"}],"tail":"\n"}],"tail":"\n"},{"t":"subpara","id":"/us/usc/t12/s4402/6/B","children":[{"t":"num","text":"(B)"},{"t":"content","text":" an uninsured national bank or an uninsured State bank that is a member of the Federal Reserve System, if the national bank or State member bank is not eligible to make application to become an insured bank under ","children":[{"t":"ref","text":"section 1815 of this title","href":"/us/usc/t12/s1815","tail":";"}],"tail":"\n"}],"tail":"\n"},{"t":"subpara","id":"/us/usc/t12/s4402/6/C","children":[{"t":"num","text":"(C)"},{"t":"content","text":" a branch or agency of a foreign bank, a foreign bank and any branch or agency of the foreign bank, or the foreign bank that established the branch or agency, as those terms are defined in section 1(b) of the International Banking Act of 1978 [","children":[{"t":"ref","text":"12 U.S.C. 3101","href":"/us/usc/t12/s3101","tail":"];"}],"tail":"\n"}],"tail":"\n"},{"t":"subpara","id":"/us/usc/t12/s4402/6/D","children":[{"t":"num","text":"(D)"},{"t":"content","text":" a corporation chartered under section 25(a)\u202f","children":[{"t":"text","text":"1","tail":" of the Federal Reserve Act ["},{"t":"ref","text":"12 U.S.C. 611","href":"/us/usc/t12/s611","tail":" et seq.]; or"}],"tail":"\n"}],"tail":"\n"},{"t":"subpara","id":"/us/usc/t12/s4402/6/E","children":[{"t":"num","text":"(E)"},{"t":"content","text":" a corporation having an agreement or undertaking with the Board of Governors of the Federal Reserve System under section 25 of the Federal Reserve Act [","children":[{"t":"ref","text":"12 U.S.C. 601","href":"/us/usc/t12/s601","tail":" et seq.]."}],"tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"para","id":"/us/usc/t12/s4402/7","children":[{"t":"num","text":"(7)"},{"t":"heading","text":"Failed financial institution"},{"t":"chapeau","text":"The term \u201cfailed financial institution\u201d means a financial institution that\u2014"},{"t":"subpara","id":"/us/usc/t12/s4402/7/A","children":[{"t":"num","text":"(A)"},{"t":"content","text":" fails to satisfy a covered contractual payment obligation when due;","tail":"\n"}],"tail":"\n"},{"t":"subpara","id":"/us/usc/t12/s4402/7/B","children":[{"t":"num","text":"(B)"},{"t":"content","text":" has commenced or had commenced against it insolvency, liquidation, reorganization, receivership (including the appointment of a receiver), conservatorship, or similar proceedings; or","tail":"\n"}],"tail":"\n"},{"t":"subpara","id":"/us/usc/t12/s4402/7/C","children":[{"t":"num","text":"(C)"},{"t":"content","text":" has generally ceased to meet its obligations when due.","tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"para","id":"/us/usc/t12/s4402/8","children":[{"t":"num","text":"(8)"},{"t":"heading","text":"Failed member"},{"t":"chapeau","text":"The term \u201cfailed member\u201d means any member that\u2014"},{"t":"subpara","id":"/us/usc/t12/s4402/8/A","children":[{"t":"num","text":"(A)"},{"t":"content","text":" fails to satisfy a covered clearing obligation when due,","tail":"\n"}],"tail":"\n"},{"t":"subpara","id":"/us/usc/t12/s4402/8/B","children":[{"t":"num","text":"(B)"},{"t":"content","text":" has commenced or had commenced against it insolvency, liquidation, reorganization, receivership (including the appointment of a receiver), conservatorship, or similar proceedings, or","tail":"\n"}],"tail":"\n"},{"t":"subpara","id":"/us/usc/t12/s4402/8/C","children":[{"t":"num","text":"(C)"},{"t":"content","text":" has generally ceased to meet its obligations when due.","tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"para","id":"/us/usc/t12/s4402/9","children":[{"t":"num","text":"(9)"},{"t":"heading","text":"Financial institution"},{"t":"content","children":[{"t":"p","text":"The term \u201cfinancial institution\u201d means a broker or dealer, a depository institution, a futures commission merchant, or any other institution as determined by the Board of Governors of the Federal Reserve System.","tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"para","id":"/us/usc/t12/s4402/10","children":[{"t":"num","text":"(10)"},{"t":"heading","text":"Futures commission merchant"},{"t":"content","children":[{"t":"p","text":"The term \u201cfutures commission merchant\u201d means a company that is registered or licensed under Federal law to engage in the business of selling futures and options in commodities.","tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"para","id":"/us/usc/t12/s4402/11","children":[{"t":"num","text":"(11)"},{"t":"heading","text":"Member"},{"t":"content","children":[{"t":"p","text":"The term \u201cmember\u201d means a member of or participant in a clearing organization, and includes the clearing organization and any other clearing organization with which such clearing organization has a netting contract.","tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"para","id":"/us/usc/t12/s4402/12","children":[{"t":"num","text":"(12)"},{"t":"heading","text":"Net entitlement"},{"t":"content","children":[{"t":"p","text":"The term \u201cnet entitlement\u201d means the amount by which the covered contractual payment entitlements of a financial institution or member exceed the covered contractual payment obligations of the institution or member after netting under a netting contract.","tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"para","id":"/us/usc/t12/s4402/13","children":[{"t":"num","text":"(13)"},{"t":"heading","text":"Net obligation"},{"t":"content","children":[{"t":"p","text":"The term \u201cnet obligation\u201d means the amount by which the covered contractual payment obligations of a financial institution or member exceed the covered contractual payment entitlements of the institution or member after netting under a netting contract.","tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"para","id":"/us/usc/t12/s4402/14","children":[{"t":"num","text":"(14)"},{"t":"heading","text":"Netting contract"},{"t":"subpara","id":"/us/usc/t12/s4402/14/A","children":[{"t":"num","text":"(A)"},{"t":"heading","text":"In general"},{"t":"chapeau","text":"The term \u201cnetting contract\u201d\u2014"},{"t":"clause","id":"/us/usc/t12/s4402/14/A/i","children":[{"t":"num","text":"(i)"},{"t":"content","text":" means a contract or agreement between 2 or more financial institutions, clearing organizations, or members that provides for netting present or future payment obligations or payment entitlements (including liquidation or close out values relating to such obligations or entitlements) among the parties to the agreement; and","tail":"\n"}],"tail":"\n"},{"t":"clause","id":"/us/usc/t12/s4402/14/A/ii","children":[{"t":"num","text":"(ii)"},{"t":"content","text":" includes the rules of a clearing organization.","tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"subpara","id":"/us/usc/t12/s4402/14/B","children":[{"t":"num","text":"(B)"},{"t":"heading","text":"Invalid contracts not included"},{"t":"content","children":[{"t":"p","text":"The term \u201cnetting contract\u201d does not include any contract or agreement that is invalid under or precluded by Federal law.","tail":"\n"}],"tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"para","id":"/us/usc/t12/s4402/15","children":[{"t":"num","text":"(15)"},{"t":"heading","text":"Payment"},{"t":"content","children":[{"t":"p","text":"The term \u201cpayment\u201d means a payment of United States dollars, another currency, or a composite currency, and a noncash delivery, including a payment or delivery to liquidate an unmatured obligation.","tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"text","text":"\n"},{"t":"text","text":"\n"}]}]}