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ARTICLE · 09 DECEMBER 2024

Index Derivatives And Current "Basket Option" Guidance

Mayer Brown
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Many companies are in the business of index creation and maintenance (in other words, the index sponsorship business).

United StatesFinance and Banking
Brennan W. Young
Brennan W. Young
Remmelt Reigersman
Remmelt Reigersman
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Many companies are in the business of index creation and maintenance (in other words, the index sponsorship business). Several household names, such as S&P Global, Nasdaq, Bloomberg, and MSCI, each sponsor hundreds of indices with strategies focused on different categories of assets, geographic regions, company size, company sector, and environmental and societal factors.1 There are many other index sponsors in the market (including some financial institutions).

For the last decade, institutions structuring index-linked derivatives (and their tax advisors) contended with the application of Internal Revenue Service (IRS) reportable transaction notices with respect to "basket options" and substantially similar transactions, found in Notice 2015-73 and Notice 2015-74 (the "Notices"),2 to such index-linked derivates. On July 12, 2024, the U.S. Treasury and the IRS released proposed regulations on "basket option contracts" (the "Proposed Regulations").3 The

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This Mayer Brown article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.

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