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.