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Derivatives

Bear Stearns Closes Novel Index Notes

Bear Stearns has sold USD2.5 million of notes linked to the outperformance of an index tracking companies such as casinos and gaming facility operators over the Standard & Poor's 500.

Bear Stearns has sold USD2.5 million of notes linked to the outperformance of an index tracking companies such as casinos and gaming facility operators over the Standard & Poor's 500. The so-called SINdex references the performance of companies including casino operators, liquor producers, distillers and cigarette manufacturers. The SINdex is based on an International Securities Exchange methodology and is administered by S&P.

In the notes, the investor receives 150% participation in the SINdex's returns if they are above those of the S&P 500 at maturity in January 2010. The notes are not principal protected, however, so if the SINdex's performance relative to the S%P 500 is negative, the investor may lose capital invested.

An official at Bear Stearns said the notes were well-received. "A lot of people liked the index and were not aware of it," he noted. It was the first time the firm has offered an outperformance structure as a registered note to U.S. retail and it took some time to explain to investors, he said, adding it may be simpler to offer structured investments linked solely to the SINdex. It has not yet been decided, however, if there will be a follow-up deal.

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