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U.S. Securities and Exchange Commission

CFTC and SEC Propose Joint Rules Relating to Security Futures Products



Washington, D.C., May 10, 2001 – The Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) today announced that they proposed joint rules to implement new statutory provisions relating to security futures products.

The Commodity Futures Modernization Act of 2000 (CFMA), enacted last December, lifted the ban on the trading of futures contracts on single stocks and narrow-based security indexes - collectively referred to as security futures products. The CFMA also established a framework for the joint regulation of security futures products by the CFTC and SEC. Futures contracts on broad-based indexes are under the exclusive jurisdiction of the CFTC.

The joint rules proposed by the CFTC and SEC relate to the distinction between broad-based and narrow-based security indexes. The CFMA itself defines the criteria for an index to be considered "narrow-based," including, among other factors, the market capitalization of each security in the index and the dollar value of that security's average daily trading volume. The statute requires the two agencies to jointly specify the methods that must be used to determine these values. The proposed rules are designed to fulfill that statutory mandate, as well as to address other issues that arise in the application of the definition of narrow-based security index.

Trading in security futures products may begin on August 21, 2001, provided that certain regulatory requirements are met. The period for public comment on the proposed rules will end 30 days from the date of their publication in the Federal Register. A copy of the proposed rules will also be available as of tomorrow on the websites of the CFTC and the SEC, at www.cftc.gov and www.sec.gov, respectively. After considering any comments, the agencies expect to adopt final rules prior to August 21.


    *   Additional Information:

Method for Determining Market Capitalization and Dollar Value of Average Daily Trading Volume; Application of the Definition of Narrow-Based Security Index


Modified: 05/10/2001