§ 4402. — Definitions.
[Laws in effect as of January 24, 2002]
[Document not affected by Public Laws enacted between
January 24, 2002 and December 19, 2002]
[CITE: 12USC4402]
TITLE 12--BANKS AND BANKING
CHAPTER 45--PAYMENT SYSTEM RISK REDUCTION
SUBCHAPTER I--BILATERAL AND CLEARING ORGANIZATION NETTING
Sec. 4402. Definitions
For purposes of this subchapter--
(1) Broker or dealer
The term ``broker or dealer'' means--
(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
(B) to the extent consistent with this title,\1\ 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.
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\1\ See References in Text note below.
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(2) Clearing organization
The term ``clearing organization'' means a clearinghouse,
clearing association, clearing corporation, or similar
organization--
(A) that provides clearing, netting, or settlement services
for its members and--
(i) in which all members other than the clearing
organization itself are financial institutions or other
clearing organizations; or
(ii) which is registered as a clearing agency under the
Securities Exchange Act of 1934 [15 U.S.C. 78a et seq.]; or
(B) that is registered as a derivatives clearing
organization under section 7a-1 of title 7.
(3) Covered clearing obligation
The term ``covered clearing obligation'' 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.
(4) Covered contractual payment entitlement
The term ``covered contractual payment entitlement'' means--
(A) an entitlement of a financial institution to receive a
payment, subject to a netting contract from another financial
institution; and
(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.
(5) Covered contractual payment obligation
The term ``covered contractual payment obligation'' means--
(A) an obligation of a financial institution to make
payment, subject to a netting contract to another financial
institution; and
(B) a covered clearing obligation.
(6) Depository institution
The term ``depository institution'' means--
(A) a depository institution as defined in section
19(b)(1)(A) of the Federal Reserve Act [12 U.S.C. 461(b)(1)(A)]
(other than clause (vii));
(B) a branch or agency as defined in section 1(b) of the
International Banking Act of 1978 [12 U.S.C. 3101];
(C) a corporation chartered under section 25(a) \1\ of the
Federal Reserve Act [12 U.S.C. 611 et seq.]; or
(D) 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 [12 U.S.C. 601 et seq.].
(7) Failed financial institution
The term ``failed financial institution'' means a financial
institution that--
(A) fails to satisfy a covered contractual payment
obligation when due;
(B) has commenced or had commenced against it insolvency,
liquidation, reorganization, receivership (including the
appointment of a receiver), conservatorship, or similar
proceedings; or
(C) has generally ceased to meet its obligations when due.
(8) Failed member
The term ``failed member'' means any member that--
(A) fails to satisfy a covered clearing obligation when due,
(B) has commenced or had commenced against it insolvency,
liquidation, reorganization, receivership (including the
appointment of a receiver), conservatorship, or similar
proceedings, or
(C) has generally ceased to meet its obligations when dud.
(9) Financial institution
The term ``financial institution'' 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.
(10) Futures commission merchant
The term ``futures commission merchant'' means a company that is
registered or licensed under Federal law to engage in the business
of selling futures and options in commodities.
(11) Member
The term ``member'' means a member of or participant in a
clearing organization, and includes the clearing organization.
(12) Net entitlement
The term ``net entitlement'' 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.
(13) Net obligation
The term ``net obligation'' 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.
(14) Netting contract
(A) In general
The term ``netting contract''--
(i) means a contract or agreement between 2 or more
financial institutions or members, that--
(I) is governed by the laws of the United States,
any State, or any political subdivision of any State,
and
(II) provides for netting present or future payment
obligations or payment entitlements (including
liquidation or close-out values relating to the
obligations or entitlements) among the parties to the
agreement; and
(ii) includes the rules of a clearing organization.
(B) Invalid contracts not included
The term ``netting contract'' does not include any contract
or agreement that is invalid under or precluded by Federal law.
(Pub. L. 102-242, title IV, Sec. 402, Dec. 19, 1991, 105 Stat. 2372;
Pub. L. 102-550, title XVI, Sec. 1606(a), Oct. 28, 1992, 106 Stat. 4087;
Pub. L. 106-554, Sec. 1(a)(5) [title I, Secs. 112(a)(2), 123(b)], Dec.
21, 2000, 114 Stat. 2763, 2763A-391, 2763A-411.)
References in Text
This title, referred to in par. (1)(B), means title IV of Pub. L.
102-242, Dec. 19, 1991, 105 Stat. 2371. For complete classification of
title IV to the Code, see Tables.
The Securities Exchange Act of 1934, referred to in par. (2)(A)(ii),
is act June 6, 1934, ch. 404, 48 Stat. 881, as amended, which is
classified principally to chapter 2B (Sec. 78a et seq.) of Title 15,
Commerce and Trade. For complete classification of this Act to the Code,
see section 78a of Title 15 and Tables.
Section 25(a) of the Federal Reserve Act, referred to in par. (6),
which is classified to subchapter II (Sec. 611 et seq.) of chapter 6 of
this title, was renumbered section 25A of that act by Pub. L. 102-242,
title I, Sec. 142(e)(2), Dec. 19, 1991, 105 Stat. 2281. Section 25 of
the Federal Reserve Act is classified to subchapter I (Sec. 601 et seq.)
of chapter 6 of this title.
Amendments
2000--Pub. L. 106-554, Sec. 1(a)(5) [title I, Sec. 112(a)(2)],
substituted ``this subchapter'' for ``this chapter'' in introductory
provisions.
Par. (2)(B). Pub. L. 106-554, Sec. 1(a)(5) [title I, Sec. 123(b)],
added subpar. (B) and struck out former subpar. (B) which read as
follows: ``that performs clearing functions for a contract market
designated pursuant to the Commodity Exchange Act.''
1992--Par. (14)(B). Pub. L. 102-550 substituted ``Federal law'' for
``Federal commodities law''.
Effective Date of 1992 Amendment
Amendment by Pub. L. 102-550 effective as if included in the Federal
Deposit Insurance Corporation Improvement Act of 1991, Pub. L. 102-242,
as of Dec. 19, 1991, see section 1609(a) of Pub. L. 102-550, set out as
a note under section 191 of this title.
