(1) DEFINITIONS. In this section: (a) “Derivative” means any financial contract or other instrument that derives its value from the value or performance of any security, currency exchange rate or interest rate or of any index or group of any securities, currency exchange rates or interest rates, but does not include any of the following: 1. Any security that is traded on a national securities exchange or on an automated interdealer quotation system sponsored by a securities association registered under 15 USC 78o-3, et seq. 2. Any forward contract which has a maturity at the time of issuance not exceeding 270 days. 3. Any contract of sale of a commodity, as defined under 7 USC 2 , for future delivery, or any option on such a contract, traded or executed on a designated contract market and subject to regulation under 7 USC 1 to 26. 4. Any security of an open-end management investment company or investment trust, if the investment company or investment trust is registered under 15 USC 80a-1 to 80a-64. 5. Any deposit held by a financial institution. 6. Any investment specifically authorized under s. 25.17 (3) (b) and (ba). 6e. Any collateralized mortgage obligation or other assetbacked security which either has one of the 2 highest ratings given by a nationally recognized rating service or is backed or collateralized by insured instruments, guarantees or pledges of the federal government, this state or an agency of the federal government or this state. 6m. Any transaction permitted under s. 25.18 (1) (n), if all of the following conditions are met at the time the transaction is entered into: a. The counterparty to the transaction is rated in, or has outstanding long-term debt which is rated in, one of the 2 highest ratings given by a nationally recognized rating service. b. The transaction is used only for specified hedging or interest rate risk reduction purposes. c. All of the board’s payment obligations under the transaction are fully backed by distinctly identified assets held in the state investment fund. 7. Any financial contract or instrument that the board determines, by rule, is not a derivative. (b) “Reverse repurchase agreement” means an agreement for the sale of securities by the board under which the board will repurchase those securities on or before a specified date and for a specified amount. (2) DERIVATIVE INVESTMENTS. After May 7, 1996, the board may not purchase or acquire any derivative in the state investment fund except in accordance with rules promulgated by the board. Rules promulgated under this subsection may not permit the purchase or acquisition of derivatives in the state investment fund unless the purchase or acquisition is made for the purpose of reducing risk of price changes or of interest rate or currency exchange rate fluctuations with respect to investments held or to be held by the board. (3) REVERSE REPURCHASE AGREEMENTS. After May 7, 1996, the board may not enter into any reverse repurchase agreement in the state investment fund unless the repurchase of securities under the agreement is required to occur no later than the next business day.
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