Narrow-Based Security Index

This Issue in United States

Concept of Narrow-Based Security Index in Futures Trading

In this context of financial law, the following is a definition of Narrow-Based Security Index: In general, the Commodity Exchange Act defines a narrow-based security index as an index of securities that meets one of the following four requirements (a) it has nine or fewer components; (b) one component comprises more than 30 percent of the index weighting; (c) the five highest weighted components comprise more than 60 percent of the index weighting, or (d) the lowest weighted components comprising in the aggregate 25 percent of the index’s weighting have an aggregate dollar value of average daily volume over a six-month period of less than $50 million ($30 million if there are at least 15 component securities). However, the legal definition in Section 1a(35) of the Commodity Exchange Act contains several exceptions to this provision. See Broad-Based Security Index, Security Future. See 7 USC 1a(35).