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SEC Approves New Supplement to Options Disclosure Document

On November 9, the Securities and Exchange Commission approved a new supplement (Supplement) to the Characteristics & Risks of Standardized Options, also known as the options disclosure document (ODD), published by the Options Clearing Corporation (OCC). The ODD provides general disclosures regarding the characteristics and risks of exchange traded options. Generally, broker-dealers must provide a customer with a copy of the ODD before accepting options orders from that customer.

Among other changes, the Supplement amends the ODD by (1) including additional disclosures regarding implied volatility index options to accommodate the listing of certain options (e.g., options listed on the Nations VolDex Index and the SPIKES Index); (2) designating the OCC, rather than an adjustment panel of the Securities Committee, as responsible for making adjustments to certain terms of options contracts in the event certain events occur (e.g., certain dividend distributions); and (3) changing the regular exercise settlement date for physical delivery stock options from the third business day following exercise (T+3) to the second business day following exercise (T+2).

The Supplement is intended to be read in conjunction with the ODD and amends and restates the April 2015 supplement to the ODD in its entirety.

The SEC order approving the Supplement is available here.

The Supplement is available here.

©2019 Katten Muchin Rosenman LLP


About this Author

Michael T. Foley, Katten, Lawyer, Finance, FINRA, Chicago
Special Counsel

Michael Foley represents broker-dealers, investment advisers and other financial services industry participants with respect to a broad spectrum of legal and regulatory matters arising under the federal securities laws.

Michael has nearly 20 years of experience in private practice and in-house at both a large, full-service broker-dealer and at an online discount broker-dealer, advising broker-dealers and other financial institutions regarding compliance with the federal securities and commodities laws, and with the regulations of the US Securities and Exchange...

Stanley V. Polit, Katten Muchin, Financial Services lawyer, Corporate Regulatory Matters Attorney

Stanley Polit concentrates his practice in transactional, corporate and regulatory aspects of financial services matters. Stan is able to provide legal services to a wide variety of clients including proprietary trading firms, hedge funds, broker-dealers, registered investment advisers, commodity trading advisers, financial institutions and general corporate clients.

Prior to joining Katten, Stan served as a council member for a national crisis management firm, where he specialized in crisis communication and merged media strategies. He has lectured extensively and conducted trainings related to these topics at numerous national and international conferences, including the National Communication Association's National Convention, the International Crisis and Risk Communication Conference and the Disaster Recovery Journal's World Business Continuity Conference.