[Federal Register Volume 59, Number 29 (Friday, February 11, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-3250]
[[Page Unknown]]
[Federal Register: February 11, 1994]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-33582; File No. SR-ODD-94-1]
Self-Regulatory Organizations; Options Clearing Corporation;
Order Approving Proposed Amendment to the Options Disclosure Document
February 4, 1994.
On February 2, 1994, the Options Clearing Corporation (``OCC''), in
conjunction with the American Stock Exchange, Inc., the Chicago Board
Options Exchange, Inc., the New York Stock Exchange, Inc., the Pacific
Stock Exchange, Inc., the Philadelphia Stock Exchange, Inc. (``PHLX''),
and the National Association of Securities Dealers, Inc. submitted
amended copies of an options disclosure document (``ODD'') to the
Securities and Exchange Commission (``SEC'' or ``Commission'') pursuant
to Rule 9b-1\1\ of the Securities Exchange Act of 1934 (``Act'').
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\1\17 CFR 240.9b-1 (1993).
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Rule 9b-1 requires that the ODD contain information concerning,
among other matters, the mechanics of buying, writing, and exercising
standardized options, and the risks of trading the options. In
addition, Rule 9b-1 prohibits a broker or dealer from accepting a
customer's options order, or approving a customer's account for
trading, unless the broker furnishes the customer with an ODD.
The amended disclosure document reflects recent changes in the
options markets. Among other things, the amended ODD provides for
disclosure to accommodate the PHLX's proposal to trade cash/spot
foreign currency options, which has been submitted separately to the
Commission for its review pursuant to Section 19(b) of the Act.\2\ The
Commission has reviewed the discussion of cash/spot foreign currency
options and finds that it complies with Rule 9b-1. In conjunction with
the ODD's general discussion of foreign currency options, the
Commission believes that the additional information regarding cash/spot
foreign currency options is sufficient to describe the special
characteristics and risks of those products.\3\
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\2\See Securities Exchange Act Release No. 32685 (July 28,
1993), 58 FR 41529 (File No. SR-PHLX-93-10).
\3\Pursuant to Rule 9b-1, the amended ODD must be provided to
investors in cash/spot foreign currency options before their
accounts are approved for transactions in cash/spot foreign currency
options or their orders for cash/spot foreign currency options are
accepted.
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In addition, the amended disclosure document incorporates
discussions of capped-style index options, Flexible Exchange Options
(``FLEX Options''), and cross-rate foreign currency options, which have
been described in supplements to the ODD that were approved previously
by the Commission.\4\
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\4\See Securities Exchange Act Release Nos. 31919 (February 24,
1993), 58 FR 12286 (order approving File No. ODD-93-1) (FLEX
Options); 29850 (October 23, 1993), 56 FR 55704 (order approving
File No. ODD-91-3) (capped-style options); and 29780 (October 2,
1991), 56 FR 51247 (order approving File No. ODD-91-2) (cross-rate
foreign currency options).
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The revised ODD, which emphasizes that the document should be read
in its entirety, contains chapters describing various options products
and a separate chapter discussing the risks of options holders and
writers, as well as the special risks associated with index options,
debt options, foreign currency options, and FLEX options. The chapters
discussing individual products refer readers to other sections of the
ODD for discussions of the risks associated with those products.
The amended disclosure document also discusses generally the risks
associated with new options products. Specifically, the revised ODD
notes that new types of options and new strategies are being developed
and that some of the risks associated with new products and strategies
will not become apparent until there has been significant experience in
trading and using them.
Rule 9b-1 provides that an options market must file five copies of
an amended options disclosure document with the Commission at least 30
days prior to the date definitive copies are furnished to customers
unless the Commission determines otherwise, having due regard to the
adequacy of the information disclosed and the protection of investors.
This provision is intended to permit the Commission either to
accelerate or extend the time period definitive copies of a disclosure
document may be distributed to the public.
The Commission has reviewed the amended disclosure document and
finds that it is consistent with the protection of investors and in the
public interest to allow the distribution of the disclosure document as
of February 28, 1994.
It Is Therefore Ordered, Pursuant to Rule 9b-1 under the Act\5\
that the proposed rule change (SR-ODD-94-1) is approved.
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\5\15 U.S.C. 78s(b)(2) (1982).
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\6\
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\6\17 CFR 200.30-3(a)(39) (1993).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-3250 Filed 2-10-94; 8:45 am]
BILLING CODE 8010-01-M
