When exchange clearing members come under stress, the clearinghouse gets active, so we talked to Kim Taylor, managing director and president of CME Clearing House Division, to see what steps were taken once Lehman Brothers Holdings declared bankruptcy on Sept. 15. The first thing Taylor points out is that Lehman's regulated clearing member entity didn't declare bankruptcy. "The broker dealer/FCM did not declare bankruptcy until it was put in a package in a sale to Barclays," Taylor says. "We had a clearing member who continued to be in good standing with us in terms of meeting all of its obligations. Their regulatory capital provisions, their customer segregated funds protections enabled the regulated entity to function in an orderly way during the period when you would expect the business to be wound down or sold. That process worked all week. And by the end of the week, Barclays had agreed to purchase certain assets of the regulated entity including the futures customer [accounts]."
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