SEC and CFTC Propose Rules Implementing Commodity Futures Modernization Law

Washington, DC, May 17, 2001 - The Securities and Exchange Commission and the Commodity Futures Trading Commission have proposed rules under the Securities Exchange Act of 1934 and the Commodity Exchange Act (CEA) implementing new statutory provisions enacted by the Commodity Futures Modernization Act of 2000 (CFMA). Comments on the proposed rules are due to the SEC and CFTC no later than June 18.

The CFMA, which became law on December 21, 2000, lifted a previous ban on single stock and narrow-based stock index futures, and established a framework for the joint regulation of these products by the SEC and the CFTC. Specifically, the CFMA amended the definition of "security" in the Exchange Act, the Securities Act of 1933, the Investment Company Act, and the Investment Advisers Act to include a "security future."

For purposes of each of these Acts, as well as the CEA, "security future" is defined, in relevant part, as "a contract of sale for future delivery of a single security or of a narrow-based security index." The definition of "narrow-based security index" includes the terms "dollar value of average daily trading volume" and "market capitalization," which are not further defined by statute. Instead, the CFMA directs the SEC and the CFTC to jointly specify by rule or regulation the methods to be used in determining "dollar value of average daily trading volume" and "market capitalization" for purposes of this definition.

The Institute submitted testimony concerning aspects of commodities futures modernization in July 2000.