SEC’s ‘Lenient’ Treatment of SPIKES Futures Tossed as Unreasoned

An SEC order exempting certain stock volatility futures from a definition that would impose heavier tax and other requirements in order to promote competition with another index was arbitrary and capricious, the D.C. Circuit said Friday.

The Securities and Exchange Commission “failed adequately to explain its rationale and failed to consider an important aspect of the problem” in its exemption of futures contracts based on the SPIKES Index from the definition of security futures, Chief Judge Sri Srinivasan said for the appeals court.

Without the exemption, SPIKES Index futures will be treated as “securities futures” rather than “futures.” The court ...