---
kind: "section"
citation: "12 U.S.C. § 4404"
title: "12"
title_heading: "Banks and Banking"
number: "4404"
heading: "Clearing organization netting"
release: "119-102"
date: "2026-07-12"
url: "https://uscodex.org/usc/12/4404"
units:
  - "Chapter 45 — Payment System Risk Reduction"
  - "Subchapter I — Bilateral and Clearing Organization Netting"
---

# §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)).

## Source credit

(Pub. L. 102–242, title IV, § 404, Dec. 19, 1991, 105 Stat. 2374; Pub. L. 109–8, title IX, § 906(c), Apr. 20, 2005, 119 Stat. 168; Pub. L. 109–390, § 4(b), Dec. 12, 2006, 120 Stat. 2695.)

## Notes

### Editorial Notes

### Amendments

2006—Subsec. (a). Pub. L. 109–390 struck out “paragraphs (8)(E), (8)(F), and (10)(B) of” before “section 1821(e)” and “section 1787(c)” and inserted “terminated, liquidated, accelerated, and” after “organization shall be”.

Subsec. (h). Pub. L. 109–390, § 4(b)(1), struck out “paragraphs (8)(E), (8)(F), and (10)(B) of” before “section 1821(e)” and “section 1787(c)”.

2005—Subsec. (a). Pub. L. 109–8, § 906(c)(1), added subsec. (a) and struck out heading and text of former subsec. (a). Text read as follows: “Notwithstanding any other provision of law, the covered contractual payment obligations and covered contractual payment entitlements of a member of a clearing organization to and from all other members of a clearing organization shall be netted in accordance with and subject to the conditions of any applicable netting contract.”

Subsec. (h). Pub. L. 109–8, § 906(c)(2), added subsec. (h).

### Statutory Notes and Related Subsidiaries

### Effective Date of 2006 Amendment

Amendment by Pub. L. 109–390 not applicable to any cases commenced under Title 11, Bankruptcy, or to appointments made under any Federal or State law, before Dec. 12, 2006, see section 7 of Pub. L. 109–390, set out as a note under section 101 of Title 11, Bankruptcy.

### Effective Date of 2005 Amendment

Amendment by Pub. L. 109–8 effective 180 days after Apr. 20, 2005, and not applicable with respect to cases commenced under Title 11, Bankruptcy, before such effective date, except as otherwise provided, see section 1501 of Pub. L. 109–8, set out as a note under section 101 of Title 11.