Court Opinion

ID: 9492384
Source: CourtListenerOpinion
Date Created: 2023-08-05 14:40:08.028446+00
Date Added: 2024-06-11T17:55:16.970176
License: Public Domain

CUDAHY, Circuit Judge,
concurring.
I certainly join without reservation the well-supported analysis of the majority. This case overall seems to illustrate the well-known tendency of regulators to identify with those that they regulate. There is something remarkable about finding inadequate the most venerable stock index of them all — originally the Dow Jones Railroad Average — launched in 1896 and still widely in circulation. Almost prima facie, the rejection of this index renders the SEC view suspect.
But the purpose of this special concurrence is to expatiate slightly on one objection lodged against the Dow Jones Utilities Average. This is the criticism that it reflects or contains no telecommunications stocks even though telephone companies have traditionally been classified as utilities. Presumably this omission represents the judgment of the people at Dow Jones that increasing competition has removed telecommunications companies from the utility category. Telecommunications enterprises generally still dispense basic, essential services comprising part of the infrastructure (one definition of a “utility”). But many of them do not now or will not soon operate in a regime of regulatory controls over entry and price (another definition of a “utility”).
According to the SEC, this inadequate level of “diversity” may render either the market segment represented by the index less than broad-based or may have that effect on the index itself or both. In any event, says the SEC, the DJUA is not comparable to the New York Stock Exchange Utilities Index.
I find this issue interesting because it is sufficiently concrete and specific to be easily understandable, unlike most of the rest of the argument that concerns quite abstract notions like “reflect,” “diversity,” “broad-based,” “substantial” and “comparable to.”
It is true that the DJUA lacks the telecommunications stocks that many may think properly to be considered as utilities. And it may be that, at least in theory, competition will play as large a role in electric power and natural gas as it has or soon will in telecommunications.
But is this relevant to whether futures trading in the DJUA conforms with statutory requirements? The majority opinion points out clearly and ingeniously why the omission of a market segment may be less favorable to the manipulation which the SEC purports to fear than omission of a single company. This is a direct answer to the diversity complaint. Another is that we merely have two good faith attempts to mirror (or “reflect”) a significant industry segment. Let them co-exist, or, as the majority suggests, compete. The very survival of the DJUA since 1929 as a widely publicized measure of the utility sector suggests that it adequately serves the needs of investors. And, absent some more convincing demonstration that it poses the threat of manipulation, longevity is a good test of adequacy, or even of the question whether an index, or its corre*727sponding market segment, is “substantial” or “broad-based.”