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These guidelines provide strategies of calculation and steering for nationwide securities exchanges, designated contract markets, registered DTEFs, and foreign boards of commerce in figuring out whether or not a safety index is narrow-based beneath the Exchange Act. website ("Coalition"),139 raised considerations over certain tax implications that these markets consider consequence from the definition of slim-primarily based security index and the foundations as proposed. As well as, the SEC believes that it is not empowered to adopt the equal of CEA Rule 41.14 beneath the Exchange Act, which provides relief for futures on indexes that grow to be broad-based, because the SEC has no jurisdiction over broad-primarily based safety index futures. The SEC additionally received a number of feedback regarding potential prices that is perhaps incurred unless different standards for the definition of slender-based mostly security index are adopted to accommodate indexes comprised of international 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 security index is traded on or topic to the principles of a overseas board of trade, that index will not be thought-about a slim-primarily based safety index if it wouldn't be a narrow-based security index if a futures contract on such index were traded on a designated contract market or registered DTEF.

Two commenters raised issues concerning the treatment of futures on Exchange Traded Funds.140 The Commissions imagine that these points fall outside the scope of the current rulemaking and is not going to address them on this context. The present 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 might take each of the eleven nationwide securities exchanges, including notice-registered national securities exchanges, expected to trade futures contracts on security indexes one hour yearly to retain any documents made or obtained by it in determining whether an index is a narrow-primarily based safety index. As to the determination of which indexes qualify as broad-primarily based and that are treated as slim-based mostly, the tax laws incorporate by reference the definition of narrow-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 shall be required to comply with the recordkeeping requirements under Rule 17a-1. National securities exchanges, together with notice-registered nationwide securities exchanges, might be required to retain and retailer any paperwork associated to determinations made using the definitions in Exchange Act Rule 3a55-1 for a minimum of five years, the first two years in an simply accessible place.

The CFMA requires that the determinations as to market capitalization and dollar worth of ADTV, and thus the status of a securities index as slender-based or broad-primarily based, be made, whereas Exchange Act Rule 17a-1 merely requires that such determinations be retained. Accordingly, to comply with these recordkeeping necessities, a national securities exchange, including a notice-registered national securities exchange, that lists or trades futures contracts on slim-based safety indexes might be required to preserve records of any calculations used to determine whether an index is slim-primarily based.158 B. Total Annual Reporting and Recordkeeping Burden 1. Capital Costs Rule 17a-1 beneath the Exchange Act requires a nationwide securities exchange, together with any discover-registered national securities exchange, that trades futures contracts on a slim-primarily based security index to keep on file for a interval of no less than 5 years, the primary two years in an simply accessible place, all information regarding their determinations that such indexes were slim-based. This commenter noted that a single compiler of the lists will lead to constant remedy of futures on security indexes.

The CFMA lifted the ban on the buying and selling of futures on single securities and on narrow-primarily based safety indexes and established a framework for the joint regulation of these merchandise by the CFTC and the SEC. The CFTC believes good cause exists for the rules to grow to be effective on August 21, 2001, so that eligible contract contributors could begin trading the new products as contemplated by the CFMA. The CFMA supplies that principal-to-principal transactions between sure eligible contract individuals in security futures merchandise could start on August 21, 2001, or such date that a futures affiliation registered underneath Section 17 of the CEA meets the requirements in Section 15A(okay)(2) of the Exchange Act.143 The CFMA lifted the ban on, and permits the buying and selling of, futures contracts on single securities and on slender-primarily based security indexes. The SEC proposed these guidelines on May 17, 2001. The preliminary comment period for the rules expired on June 18, 2001. The remark interval, nevertheless, was extended by the CFTC and the SEC until July 11, 2001. After reviewing and contemplating the feedback acquired, the SEC is adopting the foundations, which offer the strategies for markets to determine whether or not a security index is narrow-based or broad-based mostly as required by the Exchange Act, as amended by the CFMA.

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