17 C.F.R. § 300.301

Contracts to be closed out or completed

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An open contractual commitment shall be closed out or completed if:

(a) The open contractual commitment:

(1) Arises from a transaction in which a customer (as defined in § 300.300) of the other broker or dealer had an interest. For the purposes of this rule a customer is deemed to have an interest in a transaction if (i) the other broker was acting as agent for the customer or (ii) the other dealer was not a market maker in the security involved, to the extent such other dealer held a firm order from the customer and in connection therewith: In the case of a buy order, prior to executing such customer's order purchased as principal the same number of shares or purchased shares to accumulate the number of shares necessary to complete the order; or in the case of a sell order, prior to executing such customer's order sold the same number of shares or a portion thereof; and

(2)(i) Had a settlement date on or within 30 calendar days prior to the filing date and the respective obligations of the parties remained outstanding on the filing date or had a settlement date which occurs on or within three business days subsequent to the filing date; and

(ii) Had a trade date on or within three business days prior to such settlement date; and

(b) The other broker or dealer can establish to the satisfaction of the trustee through appropriate documentation that:

(1) In the case of a broker or dealer who maintains his records on a specific identification basis:

(i) The open contractual commitment arose out of a transaction in which his customer had such an interest, and

(ii) In the case of a failed to deliver of the debtor, as of the filing date such broker's or dealer's customer's interest had not been sold to such broker or dealer; or

(2) In the case of a broker or dealer who maintains his records other than on a specific identification basis, he has determined that a customer had such an interest in a manner consistent with that used by such broker or dealer prior to the filing date to allocate fails to receive and fails to deliver in computing the special reserve bank account requirement pursuant to the provisions of Rule 15c3-3 under the Securities Exchange Act of 1934 (17 CFR 240.15c3-3); or

(3) In the case of a broker or dealer not described in paragraph (b)(1) or (2) of this section, he has made the determination in a manner which the trustee finds to be fair and equitable.

[44 FR 21211, Apr. 9, 1979, as amended at 62 FR 10451, Mar. 7, 1997]

Notes of Decisions

Cited in 2 cases, 1985–1997 · leading case: In Re Adler Coleman Clearing Corp., 211 B.R. 486 (Bankr. S.D.N.Y. 1997).

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In Re Adler Coleman Clearing Corp., 211 B.R. 486 (Bankr. S.D.N.Y. 1997). · cites it 2× “From that, RCM reasons that because the trades are open contractual commitments with a customer of another broker or dealer, the Trustee must complete or close them out under 17 C.F.R. § 300.301 and in accordance with 17 C.”

In Re John Muir & Co., 51 B.R. 150 (Bankr. S.D.N.Y. 1985). “301 ( 17 C.F.R. § 300.301 (1983)). Neu-berger further argues that denial of SIPC protection to a stock loan made in connection with securities transactions violates Congress’ intent in passing SIPA.”

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