As part of their efforts toward harmonization of regulation of derivatives, the SEC and CFTC have issued their first in what is expected to be a series of joint orders. The joint orders released last week relate to security-based futures contracts, clarify the SEC's and CFTC's respective jurisdictions, and broaden the products permitted to underlie these kinds of futures contracts.
According to the joint press release:
The first joint order excludes certain foreign and domestic volatility indexes that are based on broad-based security indexes from the definition of "narrow-based security index". As a result of the joint order, futures on foreign and domestic volatility indexes that meet the criteria contained in the joint order are treated as "broad-based security indexes" and subject to the exclusive jurisdiction of the CFTC. Options on such volatility indexes are subject to the federal securities laws and the jurisdiction of the SEC. The joint order, contained in SEC Release No. 34-61020, became effective on November 17.
The second joint order allows security futures products to be based on any security that is eligible to underlie an exchange-listed security option, including certain unregistered debt securities. This joint order, which is contained in SEC Release No. 34-61020, became effective on November 19.
The full text of the SEC-CFTC press release is available at: http://www.sec.gov/news/press/2009/2009-252.htm
The full texts of the two joint orders are available at:
- SEC-CFTC Joint Report on Regulatory Harmonization, October 19, 2009
- SEC and CFTC Chiefs to Issue Harmonization Report, October 2, 2009
- Joint SEC-CFTC Meeting Webcast Archives, September 11, 2009
- SEC and CFTC Announce Meetings on Harmonizing Regulations, August 25, 2009