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A financial contract or a series of transactions undertaken, entirely or in part, because the transaction(s) enable(s) one or both of the counterparties to accomplish a financial or operating objective which is unavailable to them directly because of regulatory obstacles. Recent regulatory arbitrage with customized equity-linked derivative structures has enabled United States-based investors to take positions linked to foreign equity indexes when they could not make direct investments in exchange-traded stock index futures contracts. Many structured note transactions are stimulated by regulatory arbitrage opportunities.
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