These guidelines provide methods of calculation and guidance for national securities exchanges, designated contract markets, registered DTEFs, and international boards of commerce in figuring out whether a safety index is slender-primarily based underneath the Exchange Act. Securities Markets Coalition (“Coalition”),139 raised concerns over certain tax implications that these markets consider end result from the definition of narrow-based safety index and the rules as proposed. In addition, the SEC believes that it’s not empowered to adopt the equivalent of CEA Rule 41.14 underneath the Exchange Act, which provides relief for futures on indexes that turn out to be broad-based mostly, as a result of the SEC has no jurisdiction over broad-based mostly safety index futures. The SEC also acquired several feedback relating to potential costs that may be incurred until completely different standards for the definition of slim-based security index are adopted to accommodate indexes comprised of foreign securities.170 The SEC notes that the Commissions have adopted Rules 41.Thirteen beneath the CEA and 3a55-3 underneath the Exchange Act, which set up that when a futures contract on a safety index is traded on or subject to the principles of a foreign board of commerce, that index will not be considered a narrow-primarily based safety index if it wouldn’t be a slim-based mostly safety index if a futures contract on such index had been traded on a delegated contract market or registered DTEF.
Two commenters raised issues concerning the therapy of futures on Exchange Traded Funds.140 The Commissions consider that these issues fall exterior the scope of the present rulemaking and will not tackle them in this context. The current burden hour estimate for Rule 17a-1, as of July 20, 1998, is 50 hours per 12 months for every exchange.160 In the Proposing Release, the SEC estimated that it will take every of the 11 nationwide securities exchanges, including discover-registered national securities exchanges, anticipated to trade futures contracts on safety indexes one hour yearly to retain any documents made or acquired by it in figuring out whether an index is a slender-based mostly safety index. As to the determination of which indexes qualify as broad-based mostly and that are handled as slender-based mostly, the tax legal guidelines incorporate by reference the definition of slim-based mostly safety index in the Exchange Act. 2. Burden Hours National securities exchanges, together with notice-registered nationwide securities exchanges, that trade futures contacts on security indexes will be required to comply with the recordkeeping necessities beneath Rule 17a-1. National securities exchanges, including discover-registered national securities exchanges, might be required to retain and retailer any documents related to determinations made utilizing the definitions in Exchange Act Rule 3a55-1 for no less than five years, the first two years in an simply accessible place.
The CFMA requires that the determinations as to market capitalization and greenback worth of ADTV, and thus the standing of a securities index as slim-based mostly or broad-based mostly, be made, while Exchange Act Rule 17a-1 merely requires that such determinations be retained. Accordingly, to adjust to these recordkeeping necessities, a nationwide securities exchange, together with a discover-registered national securities exchange, that lists or trades futures contracts on slim-based security indexes will be required to preserve data of any calculations used to find out whether an index is narrow-primarily based.158 B. Total Annual Reporting and Recordkeeping Burden 1. Capital Costs Rule 17a-1 under the Exchange Act requires a nationwide securities exchange, together with any notice-registered nationwide securities exchange, that trades futures contracts on a slender-based mostly security index to carry on file for a period of no less than 5 years, the primary two years in an easily accessible place, all records regarding their determinations that such indexes had been slim-based. This commenter famous that a single compiler of the lists will end in constant therapy of futures on security indexes.
The CFMA lifted the ban on the buying and selling of futures on single securities and on slim-based mostly security indexes and established a framework for the joint regulation of those merchandise by the CFTC and the SEC. The CFTC believes good trigger exists for the rules to turn out to be efficient on August 21, 2001, in order that eligible contract participants may start buying and selling the brand new content from coin-viewer.com products as contemplated by the CFMA. The CFMA gives that principal-to-principal transactions between certain eligible contract contributors in security futures merchandise may begin on August 21, 2001, or such date that a futures association registered below Section 17 of the CEA meets the requirements in Section 15A(k)(2) of the Exchange Act.143 The CFMA lifted the ban on, and permits the trading of, futures contracts on single securities and on slender-primarily based safety indexes. The SEC proposed these guidelines on May 17, 2001. The initial remark period for the rules expired on June 18, 2001. The remark interval, nonetheless, was extended by the CFTC and the SEC until July 11, 2001. After reviewing and contemplating the feedback received, the SEC is adopting the foundations, which offer the methods for markets to find out whether a safety index is slim-based or broad-based mostly as required by the Exchange Act, as amended by the CFMA.