---
kind: "range"
citation: "12 U.S.C. §§ 4402–4407"
title: "12"
from: "4402"
to: "4407"
count: 7
release: "119-102"
url: "https://uscodex.org/usc/12/4402..4407"
---

# §4402. Definitions


For purposes of this subchapter—

- (1) **Broker or dealer—** The term “broker or dealer” means—
  - (A) any [company](/usc/12/24a.md?p=g-1) that is registered or licensed under Federal or [State](/usc/12/1707.md?p=d) 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](/usc/12/221a.md?p=a) of Governors of the Federal Reserve System, any [company](/usc/12/24a.md?p=g-1) that is an [affiliate](/usc/12/24a.md?p=g-1) of a [company](/usc/12/24a.md?p=g-1) described in [subparagraph (A)](#1-A) and that is engaged in the business of entering into [netting contracts](#14-A).
- (2) **Clearing organization—** The term “clearing organization” means a clearinghouse, clearing [association](/usc/12/1828.md?p=s-4-E-i), clearing [corporation](/usc/12/2277a.md?p=2), or similar organization—
  - (A) that provides clearing, netting, or settlement services for its [members](#11) and—
    - (i) in which all [members](#11) other than the [clearing organization](#2) itself are [financial institutions](#9) or other [clearing organizations](#2); or
    - (ii) which is registered as a clearing [agency](/usc/12/1422.md?p=12) under the Securities Exchange Act of 1934 [[15 U.S.C. 78a](/usc/15/78a.md) et seq.], or is exempt from such registration by order of the Securities and Exchange Commission; or
  - (B) that is registered as a derivatives [clearing organization](#2) under [section 7a–1 of title 7](/usc/7/7a–1.md), that has been granted an exemption under [section 6(c)(1) of title 7](/usc/7/6.md?p=c-1), or that is a multilateral [clearing organization](#2) (as defined in [section 4421](/usc/12/4421.md)[^1] of this title).
- (3) **Covered clearing obligation—** The term “covered clearing obligation” means an obligation of a [member](#11) of a [clearing organization](#2) to make [payment](#15) to another [member](#11) of a [clearing organization](#2), subject to a [netting contract](#14-A).
- (4) **Covered contractual payment entitlement—** The term “covered contractual payment entitlement” means—
  - (A) an entitlement of a [financial institution](#9) to receive a [payment](#15), subject to a [netting contract](#14-A) from another [financial institution](#9); and
  - (B) an entitlement of a [member](#11) of a [clearing organization](#2) to receive [payment](#15), subject to a [netting contract](#14-A), from another [member](#11) of a [clearing organization](#2) of a [covered clearing obligation](#3).
- (5) **Covered contractual payment obligation—** The term “covered contractual payment obligation” means—
  - (A) an obligation of a [financial institution](#9) to make [payment](#15), subject to a [netting contract](#14-A) to another [financial institution](#9); and
  - (B) a [covered clearing obligation](#3).
- (6) **Depository institution—** The term “depository institution” means—
  - (A) a [depository institution](#6) as defined in section 19(b)(1)(A) of the Federal Reserve Act [[12 U.S.C. 461(b)(1)(A)](/usc/12/461.md?p=b-1-A)] (other than clause (vii));
  - (B) an uninsured [national bank](/usc/12/221a.md?p=a) or an uninsured [State bank](/usc/12/1835a.md?p=e-1) that is a [member](#11) of the Federal Reserve System, if the [national bank](/usc/12/221a.md?p=a) or [State member bank](/usc/12/5301.md?p=18-A) is not eligible to make application to become an [insured bank](/usc/12/24a.md?p=g-2) under [section 1815 of this title](/usc/12/1815.md);
  - (C) a branch or [agency](/usc/12/1422.md?p=12) of a [foreign bank](/usc/12/1817.md?p=j-9-B-i), a [foreign bank](/usc/12/1817.md?p=j-9-B-i) and any branch or [agency](/usc/12/1422.md?p=12) of the [foreign bank](/usc/12/1817.md?p=j-9-B-i), or the [foreign bank](/usc/12/1817.md?p=j-9-B-i) that established the branch or [agency](/usc/12/1422.md?p=12), as those terms are defined in section 1(b) of the International Banking Act of 1978 [[12 U.S.C. 3101](/usc/12/3101.md)];
  - (D) a [corporation](/usc/12/2277a.md?p=2) chartered under [section 25(a)](/usc/12/25.md)[^1] of the Federal Reserve Act [[12 U.S.C. 611](/usc/12/611.md) et seq.]; or
  - (E) a [corporation](/usc/12/2277a.md?p=2) having an agreement or undertaking with the [Board](/usc/12/221a.md?p=a) of Governors of the Federal Reserve System under section 25 of the Federal Reserve Act [[12 U.S.C. 601](/usc/12/601.md) et seq.].
- (7) **Failed financial institution—** The term “failed financial institution” means a [financial institution](#9) that—
  - (A) fails to satisfy a [covered contractual payment obligation](#5) when due;
  - (B) has commenced or had commenced against it insolvency, liquidation, reorganization, receivership ([including](/usc/12/25b.md?p=a-3) 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](#11) that—
  - (A) fails to satisfy a [covered clearing obligation](#3) when due,
  - (B) has commenced or had commenced against it insolvency, liquidation, reorganization, receivership ([including](/usc/12/25b.md?p=a-3) the appointment of a receiver), conservatorship, or similar proceedings, or
  - (C) has generally ceased to meet its obligations when due.
- (9) **Financial institution—** The term “financial institution” means a [broker or dealer](#1), a [depository institution](#6), a [futures commission merchant](#10), or any other institution as determined by the [Board](/usc/12/221a.md?p=a) of Governors of the Federal Reserve System.
- (10) **Futures commission merchant—** The term “futures commission merchant” means a [company](/usc/12/24a.md?p=g-1) 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](#2), and [includes](/usc/12/25b.md?p=a-3) the [clearing organization](#2) and any other [clearing organization](#2) with which such [clearing organization](#2) has a [netting contract](#14-A).
- (12) **Net entitlement—** The term “net entitlement” means the amount by which the [covered contractual payment entitlements](#4) of a [financial institution](#9) or [member](#11) exceed the [covered contractual payment obligations](#5) of the institution or [member](#11) after netting under a [netting contract](#14-A).
- (13) **Net obligation—** The term “net obligation” means the amount by which the [covered contractual payment obligations](#5) of a [financial institution](#9) or [member](#11) exceed the [covered contractual payment entitlements](#4) of the institution or [member](#11) after netting under a [netting contract](#14-A).
- (14) **Netting contract—**
  - (A) **In general—** The term “netting contract”—
    - (i) means a contract or agreement between 2 or more [financial institutions](#9), [clearing organizations](#2), or [members](#11) that provides for netting present or future [payment](#15) obligations or [payment](#15) entitlements ([including](/usc/12/25b.md?p=a-3) liquidation or close out values relating to such obligations or entitlements) among the parties to the agreement; and
    - (ii) [includes](/usc/12/25b.md?p=a-3) the rules of a [clearing organization](#2).
  - (B) **Invalid contracts not included—** The term “[netting contract](#14-A)” does not include any contract or agreement that is invalid under or precluded by Federal law.
- (15) **Payment—** The term “payment” means a payment of United States dollars, another currency, or a composite currency, and a noncash delivery, [including](/usc/12/25b.md?p=a-3) a payment or delivery to liquidate an unmatured obligation.

# §4403. Bilateral netting

- (a) **General rule—** Notwithstanding any other provision of [State](/usc/12/1707.md?p=d) or Federal law (other than [section 1821(e) of this title](/usc/12/1821.md?p=e), [section 5390(c) of this title](/usc/12/5390.md?p=c), [section 4617 of this title](/usc/12/4617.md), [section 1787(c) of this title](/usc/12/1787.md?p=c), or any order authorized under [section 78eee(b)(2) of title 15](/usc/15/78eee.md?p=b-2)), the [covered contractual payment obligations](/usc/12/4402.md?p=5) and the [covered contractual payment entitlements](/usc/12/4402.md?p=4) between any 2 [financial institutions](/usc/12/4402.md?p=9) shall be terminated, liquidated, accelerated, and netted in accordance with, and subject to the conditions of, the terms of any applicable [netting contract](/usc/12/4402.md?p=14-A) (except as provided in [section 561(b)(2) of title 11](/usc/11/561.md?p=b-2)).
- (b) **Limitation on obligation to make payment—** The only obligation, if any, of a [financial institution](/usc/12/4402.md?p=9) to make [payment](/usc/12/4402.md?p=15) with respect to [covered contractual payment obligations](/usc/12/4402.md?p=5) to another [financial institution](/usc/12/4402.md?p=9) shall be equal to its [net obligation](/usc/12/4402.md?p=13) to such other [financial institution](/usc/12/4402.md?p=9), and no such obligation shall exist if there is no [net obligation](/usc/12/4402.md?p=13).
- (c) **Limitation on right to receive payment—** The only right, if any, of a [financial institution](/usc/12/4402.md?p=9) to receive [payments](/usc/12/4402.md?p=15) with respect to [covered contractual payment entitlements](/usc/12/4402.md?p=4) from another [financial institution](/usc/12/4402.md?p=9) shall be equal to its [net entitlement](/usc/12/4402.md?p=12) with respect to such other [financial institution](/usc/12/4402.md?p=9), and no such right shall exist if there is no [net entitlement](/usc/12/4402.md?p=12).
- (d) **Payment of net entitlement of failed financial institution—** The [net entitlement](/usc/12/4402.md?p=12) of any [failed financial institution](/usc/12/4402.md?p=7), if any, shall be paid to the [failed financial institution](/usc/12/4402.md?p=7) in accordance with, and subject to the conditions of, the applicable [netting contract](/usc/12/4402.md?p=14-A).
- (e) **Effectiveness notwithstanding status as financial institution—** This section shall be given effect notwithstanding that a [financial institution](/usc/12/4402.md?p=9) is a [failed financial institution](/usc/12/4402.md?p=7).
- (f) **Enforceability of security agreements—** The provisions of any security agreement or arrangement or other [credit](/usc/12/5481.md?p=7) enhancement related to one or more [netting contracts](/usc/12/4402.md?p=14-A) between any 2 [financial institutions](/usc/12/4402.md?p=9) shall be enforceable in accordance with their terms (except as provided in [section 561(b)(2) of title 11](/usc/11/561.md?p=b-2)), and shall not be stayed, avoided, or otherwise limited by any [State](/usc/12/1707.md?p=d) or Federal law (other than [section 1821(e) of this title](/usc/12/1821.md?p=e), [section 1787(c) of this title](/usc/12/1787.md?p=c), and [section 78eee(b)(2) of title 15](/usc/15/78eee.md?p=b-2)).

# §4404. Clearing organization netting

- (a) **General rule—** Notwithstanding any other provision of [State](/usc/12/1707.md?p=d) or Federal law (other than [section 1821(e) of this title](/usc/12/1821.md?p=e), [section 1787(c) of this title](/usc/12/1787.md?p=c), and any order authorized under [section 78eee(b)(2) of title 15](/usc/15/78eee.md?p=b-2)), the [covered contractual payment obligations](/usc/12/4402.md?p=5) and the [covered contractual payment entitlements](/usc/12/4402.md?p=4) of a [member](/usc/12/4402.md?p=11) of a [clearing organization](/usc/12/4402.md?p=2) to and from all other [members](/usc/12/4402.md?p=11) of a [clearing organization](/usc/12/4402.md?p=2) shall be terminated, liquidated, accelerated, and netted in accordance with and subject to the conditions of any applicable [netting contract](/usc/12/4402.md?p=14-A) (except as provided in [section 561(b)(2) of title 11](/usc/11/561.md?p=b-2)).
- (b) **Limitation of obligation to make payment—** The only obligation, if any, of a [member](/usc/12/4402.md?p=11) of a [clearing organization](/usc/12/4402.md?p=2) to make [payment](/usc/12/4402.md?p=15) with respect to [covered contractual payment obligations](/usc/12/4402.md?p=5) arising under a single [netting contract](/usc/12/4402.md?p=14-A) to any other [member](/usc/12/4402.md?p=11) of a [clearing organization](/usc/12/4402.md?p=2) shall be equal to its [net obligation](/usc/12/4402.md?p=13) arising under that [netting contract](/usc/12/4402.md?p=14-A), and no such obligation shall exist if there is no [net obligation](/usc/12/4402.md?p=13).
- (c) **Limitation on right to receive payment—** The only right, if any, of a [member](/usc/12/4402.md?p=11) of a [clearing organization](/usc/12/4402.md?p=2) to receive [payment](/usc/12/4402.md?p=15) with respect to a [covered contractual payment entitlement](/usc/12/4402.md?p=4) arising under a single [netting contract](/usc/12/4402.md?p=14-A) from other [members](/usc/12/4402.md?p=11) of a [clearing organization](/usc/12/4402.md?p=2) shall be equal to its [net entitlement](/usc/12/4402.md?p=12) arising under that [netting contract](/usc/12/4402.md?p=14-A), and no such right shall exist if there is no [net entitlement](/usc/12/4402.md?p=12).
- (d) **Entitlement of failed members—** The [net entitlement](/usc/12/4402.md?p=12), if any, of any [failed member](/usc/12/4402.md?p=8) of a [clearing organization](/usc/12/4402.md?p=2) shall be paid to the [failed member](/usc/12/4402.md?p=8) in accordance with, and subject to the conditions of, the applicable [netting contract](/usc/12/4402.md?p=14-A).
- (e) **Obligations of failed members—** The [net obligation](/usc/12/4402.md?p=13), if any, of any [failed member](/usc/12/4402.md?p=8) of a [clearing organization](/usc/12/4402.md?p=2) shall be determined in accordance with, and subject to the conditions of, the applicable [netting contract](/usc/12/4402.md?p=14-A).
- (f) **Limitation on claims for entitlement—** A [failed member](/usc/12/4402.md?p=8) of a [clearing organization](/usc/12/4402.md?p=2) shall have no recognizable claim against any [member](/usc/12/4402.md?p=11) of a [clearing organization](/usc/12/4402.md?p=2) for any amount based on such [covered contractual payment entitlements](/usc/12/4402.md?p=4) other than its [net entitlement](/usc/12/4402.md?p=12).
- (g) **Effectiveness notwithstanding status as member—** This section shall be given effect notwithstanding that a [member](/usc/12/4402.md?p=11) is a [failed member](/usc/12/4402.md?p=8).
- (h) **Enforceability of security agreements—** The provisions of any security agreement or arrangement or other [credit](/usc/12/5481.md?p=7) enhancement related to one or more [netting contracts](/usc/12/4402.md?p=14-A) between any 2 [members](/usc/12/4402.md?p=11) of a [clearing organization](/usc/12/4402.md?p=2) shall be enforceable in accordance with their terms (except as provided in [section 561(b)(2) of title 11](/usc/11/561.md?p=b-2)), and shall not be stayed, avoided, or otherwise limited by any [State](/usc/12/1707.md?p=d) or Federal law (other than [section 1821(e) of this title](/usc/12/1821.md?p=e), [section 1787(c) of this title](/usc/12/1787.md?p=c), and [section 78eee(b)(2) of title 15](/usc/15/78eee.md?p=b-2)).

# §4405. Preemption


No stay, injunction, avoidance, moratorium, or similar proceeding or order, whether issued or granted by a court, administrative [agency](/usc/12/1422.md?p=12), or otherwise, shall limit or delay application of otherwise enforceable [netting contracts](/usc/12/4402.md?p=14-A) in accordance with sections [4403](/usc/12/4403.md) and [4404](/usc/12/4404.md) of this title.


# §4406. Relationship to other payments systems


This chapter shall have no effect by implication or otherwise on the validity or legal enforceability of a netting arrangement of any [payment](/usc/12/4402.md?p=15) system which is not subject to this chapter.


# §4406a. Treatment of contracts with uninsured national banks, uninsured Federal branches and agencies, certain uninsured State member banks, and Edge Act corporations

- (a) **In general—** Notwithstanding any other provision of law, paragraphs [(8)](/usc/12/11.md), [(9)](/usc/12/11.md), [(10)](/usc/12/11.md), and [(11)](/usc/12/11.md) of section 11(e) of the Federal [Deposit](/usc/12/5301.md?p=18-A) Insurance Act [[12 U.S.C. 1821(e)](/usc/12/1821.md?p=e)] shall apply to an uninsured [national bank](/usc/12/221a.md?p=a) or uninsured [Federal branch](#d) or [Federal agency](#d), a [corporation](/usc/12/2277a.md?p=2) chartered under section 25A of the Federal Reserve Act [[12 U.S.C. 611](/usc/12/611.md) et seq.], or an uninsured [State member bank](/usc/12/5301.md?p=18-A) which operates, or operates as, a multilateral [clearing organization](/usc/12/4402.md?p=2) pursuant to [section 4422](/usc/12/4422.md)[^1] of this title, except that for such purpose—
  - (1) any reference to the “[Corporation](/usc/12/2277a.md?p=2) as receiver” or “the receiver or the [Corporation](/usc/12/2277a.md?p=2)” shall refer to the receiver appointed by the Comptroller of the Currency in the case of an uninsured [national bank](/usc/12/221a.md?p=a) or uninsured [Federal branch](#d) or [agency](/usc/12/1422.md?p=12), or to the receiver appointed by the [Board](/usc/12/221a.md?p=a) of Governors of the Federal Reserve System in the case of a [corporation](/usc/12/2277a.md?p=2) chartered under section 25A of the Federal Reserve Act [[12 U.S.C. 611](/usc/12/611.md) et seq.] or an uninsured [State member bank](/usc/12/5301.md?p=18-A);
  - (2) any reference to the “[Corporation](/usc/12/2277a.md?p=2)” (other than in [section 11(e)(8)(D)](/usc/12/11.md) of such Act [[12 U.S.C. 1821(e)(8)(D)](/usc/12/1821.md?p=e-8-D)]), the “[Corporation](/usc/12/2277a.md?p=2), whether acting as such or as conservator or receiver”, a “receiver”, or a “conservator” shall refer to the receiver or conservator appointed by the Comptroller of the Currency in the case of an uninsured [national bank](/usc/12/221a.md?p=a) or uninsured [Federal branch](#d) or [agency](/usc/12/1422.md?p=12), or to the receiver or conservator appointed by the [Board](/usc/12/221a.md?p=a) of Governors of the Federal Reserve System in the case of a [corporation](/usc/12/2277a.md?p=2) chartered under section 25A of the Federal Reserve Act [[12 U.S.C. 611](/usc/12/611.md) et seq.] or an uninsured [State member bank](/usc/12/5301.md?p=18-A); and
  - (3) any reference to an “[insured depository institution](/usc/12/24a.md?p=g-2)” or “[depository institution](/usc/12/4402.md?p=6)” shall refer to an uninsured [national bank](/usc/12/221a.md?p=a), an uninsured [Federal branch](#d) or [Federal agency](#d), a [corporation](/usc/12/2277a.md?p=2) chartered under section 25A of the Federal Reserve Act [[12 U.S.C. 611](/usc/12/611.md) et seq.], or an uninsured [State member bank](/usc/12/5301.md?p=18-A) which operates, or operates as, a multilateral [clearing organization](/usc/12/4402.md?p=2) pursuant to [section 4422](/usc/12/4422.md)[^1] of this title.
- (b) **Liability—** The liability of a receiver or conservator of an uninsured [national bank](/usc/12/221a.md?p=a), uninsured [Federal branch](#d) or [agency](/usc/12/1422.md?p=12), a [corporation](/usc/12/2277a.md?p=2) chartered under section 25A of the Federal Reserve Act [[12 U.S.C. 611](/usc/12/611.md) et seq.], or an uninsured [State member bank](/usc/12/5301.md?p=18-A) which operates, or operates as, a multilateral [clearing organization](/usc/12/4402.md?p=2) pursuant to [section 4422](/usc/12/4422.md)[^1] of this title, shall be determined in the same manner and subject to the same limitations that apply to receivers and conservators of [insured depository institutions](/usc/12/24a.md?p=g-2) under section 11(e) of the Federal [Deposit](/usc/12/5301.md?p=18-A) Insurance Act [[12 U.S.C. 1821(e)](/usc/12/1821.md?p=e)].
- (c) **Regulatory authority—**
  - (1) **In general—** The Comptroller of the Currency in the case of an uninsured [national bank](/usc/12/221a.md?p=a) or uninsured [Federal branch](#d) or [agency](/usc/12/1422.md?p=12) and the [Board](/usc/12/221a.md?p=a) of Governors of the Federal Reserve System in the case of a [corporation](/usc/12/2277a.md?p=2) chartered under section 25A of the Federal Reserve Act [[12 U.S.C. 611](/usc/12/611.md) et seq.], or an uninsured [State member bank](/usc/12/5301.md?p=18-A) that operates, or operates as, a multilateral [clearing organization](/usc/12/4402.md?p=2) pursuant to [section 4422](/usc/12/4422.md)[^1] of this title, in consultation with the Federal [Deposit](/usc/12/5301.md?p=18-A) Insurance [Corporation](/usc/12/2277a.md?p=2), may each promulgate regulations solely to implement this section.
  - (2) **Specific requirement—** In promulgating regulations, limited solely to implementing paragraphs [(8)](/usc/12/11.md), [(9)](/usc/12/11.md), [(10)](/usc/12/11.md), and [(11)](/usc/12/11.md) of section 11(e) of the Federal [Deposit](/usc/12/5301.md?p=18-A) Insurance Act [[12 U.S.C. 1821(e)](/usc/12/1821.md?p=e)], the Comptroller of the Currency and the [Board](/usc/12/221a.md?p=a) of Governors of the Federal Reserve System each shall ensure that the regulations generally are consistent with the regulations and policies of the Federal [Deposit](/usc/12/5301.md?p=18-A) Insurance [Corporation](/usc/12/2277a.md?p=2) adopted pursuant to the Federal [Deposit](/usc/12/5301.md?p=18-A) Insurance Act [[12 U.S.C. 1811](/usc/12/1811.md) et seq.].
- (d) **Definitions—** For purposes of this section, the terms “Federal branch”, “Federal agency”, and “foreign bank” have the same meanings as in [section 3101 of this title](/usc/12/3101.md).

# §4407. National emergencies


The provisions of this chapter may not be construed to limit the authority of the President under the Trading With the Enemy Act (50 U.S.C. App. 1 et seq.) [now [50 U.S.C. 4301](/usc/50/4301.md) et seq.] or the International Emergency Economic Powers Act ([50 U.S.C. 1701](/usc/50/1701.md) et seq.).