Release Number 4593-01

For Release: December 21, 2001

Joint Press Release by SEC and CFTC

Washington, D.C. -- Securities and Exchange Commission Chairman Harvey L. Pitt and Commodity Futures Trading Commission Chairman James E. Newsome jointly pledged to seek prompt agency adoption of final rules relating to security futures products, pursuant to authorization of such products by the Commodity Futures Modernization Act of 2000 (CFMA).

Chairmen Pitt and Newsome expressed confidence that they would promptly achieve consensus on remaining issues to allow security futures products to trade in a fair and competitive manner at the earliest possible date, while avoiding regulatory arbitrage between the options and futures markets. Chairmen Pitt and Newsome also noted that they are committed to ensuring customer protection and encouraging innovation and new product development quickly.

Chairmen Pitt and Newsome committed their agencies to work toward promulgating final rules relating to margin on these products, as well as rules relating to protection of customer funds, that would allow trading by the public of security futures products by early in the second quarter 2002.

The Chairmen have agreed that, in light of the comments received by the Commissions, the agencies will jointly work to adopt a stand-alone margin rule to govern the conduct of financial relations with respect to security futures carried in a futures account.

Chairmen Pitt and Newsome also agreed that the CFMA does not require, by its terms, that implementation of portfolio margining for security futures be deferred until it has been approved for exchange-traded options, provided that the essential goal of avoiding regulatory arbitrage between security futures and exchange-traded options is achieved.

With regard to foreign security index products, Chairmen Pitt and Newsome agreed to move forward promptly in this area in accordance with the requirements of the CFMA. They have instructed their staffs to address these issues, and expect to announce proposals in the near future on several matters relating to foreign security index products.
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