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Title 7, AgricultureRelease 119-110

§27c Exclusion of Certain Other Identified Banking Products

Title 7 › CHAPTER 1 — COMMODITY EXCHANGES › § 27c

Last updated Sep 22, 2026|Official source

Summary

The Commodity Futures Trading Commission must not treat a hybrid instrument as a futures or other commodity product if the instrument is mostly a banking product under a four-part test. The four rules are: the issuer gets full payment when the product is delivered; the buyer does not have to make extra payments after purchase; the issuer is not required to mark the product to market; and it is not sold as a futures contract or option under the Commodity Exchange Act. Mark-to-market margining does not mean a secured debt issuer having to add collateral to protect the buyer.

Full Legal Text

Title 7, §27c

Agriculture, Source: USLM XML via OLRC

(a)In general
No provision of the Commodity Exchange Act [7 U.S.C. 1 et seq.] shall apply to, and the Commodity Futures Trading Commission shall not exercise regulatory authority with respect to, a banking product if the product is a hybrid instrument that is predominantly a banking product under the predominance test set forth in subsection (b).
(b)Predominance test
A hybrid instrument shall be considered to be predominantly a banking product for purposes of this section if—
(1)the issuer of the hybrid instrument receives payment in full of the purchase price of the hybrid instrument substantially contemporaneously with delivery of the hybrid instrument;
(2)the purchaser or holder of the hybrid instrument is not required to make under the terms of the instrument, or any arrangement referred to in the instrument, any payment to the issuer in addition to the purchase price referred to in paragraph (1), whether as margin, settlement payment, or otherwise during the life of the hybrid instrument or at maturity;
(3)the issuer of the hybrid instrument is not subject by the terms of the instrument to mark-to-market margining requirements; and
(4)the hybrid instrument is not marketed as a contract of sale of a commodity for future delivery (or option on such a contract) subject to the Commodity Exchange Act [7 U.S.C. 1 et seq.].
(c)Mark-to-market margining requirement
For purposes of subsection (b)(3) of this title, mark-to-market margining requirements shall not include the obligation of an issuer of a secured debt instrument to increase the amount of collateral held in pledge for the benefit of the purchaser of the secured debt instrument to secure the repayment obligations of the issuer under the secured debt instrument.

Legislative History

Notes & Related Subsidiaries

Editorial Notes

References in Text

The Commodity Exchange Act, referred to in subsecs. (a) and (b)(4), is act Sept. 21, 1922, ch. 369, 42 Stat. 998, which is classified generally to this chapter. For complete classification of this Act to the Code, see section 1 of this title and Tables. Codification Section was enacted as part of the Legal Certainty for Bank Products Act of 2000, and also as part of the Commodity Futures Modernization Act of 2000, and not as part of the Commodity Exchange Act which comprises this chapter.

Reference

Citations & Metadata

Citation

7 U.S.C. § 27c

Title 7, Agriculture

Last Updated

Sep 22, 2026

Release point: 119-110