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Securities Regulation, Cryptotransactions Keyed to Goforth
Board of Trade of City of Chicago v. Securities and Exchange Commission
Citation:
187 F.3d 713 (1999)Facts
The Dow Jones Transportation Average, established in 1884, and the Utilities Average, dating from 1929, are venerable market indicators. When Dow Jones & Co. agreed in 1997 to license its indexes for financial products, both stock and futures markets sought to trade products based on them. The SEC approved options trading on all three major Dow Jones averages and approved futures contracts on the Industrial Average but blocked futures on the Utilities and Transportation Averages. The SEC’s primary objection was that these indexes contained only fifteen and twenty stocks respectively, fewer than the twenty-five stocks recommended in the 1984 Joint Policy Statement issued by the SEC and CFTC. The Transportation Average tracks approximately one hundred forty-five transportation stocks with over two hundred billion dollars capitalization, while the Utilities Average represents one hundred forty-five utility firms with nearly three hundred billion dollars capitalization. Both indexes demonstrated correlation exceeding ninety-two percent with their respective market segments. The SEC expressed concerns about surrogate trading and manipulation despite not making formal findings under the statutory manipulation standard. Robert Mackay, an expert witness, testified that the indexes were too diversified to be attractive for surrogate trading, but the SEC dismissed this evidence without substantial rebuttal.
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