00-6007. Self-Regulatory Organizations; The Options Clearing Corporation; Order Granting Approval to Proposed Supplement to Options Disclosure Document Regarding FLEX Equity Options

March 2, 2000.

On March 2, 2000, the Options Clearing Corporation (“OCC”) submitted to the Securities and Exchange Commission (“SEC” or “Commission”), pursuant to Rule 9b-1 under the Securities Exchange Act of 1934 (“Act”),^[1] five definitive copies of a Supplement to its options disclosure document (“ODD”), which describes, among other things, the risks and characteristics of trading in flexibly structure options (“FLEX options”). In particular, the Supplement deletes the discussion of restrictions on exercise price intervals and exercise prices for FLEX equity call options.^[2]

The ODD currently contains general disclosures on the characteristics and risks of trading options on equity securities. The Commission has approved proposals by three options exchanges to remove restrictions on exercise price intervals and exercise prices for FLEX equity call options.^[3] The proposed Supplement to the ODD deletes the discussion of these restrictions.

The Commission has reviewed the ODD Supplement and finds that it complies with Rule 9b-1 under the Act.^[4] The Supplement is intended to be read in conjunction with the ODD, which discusses the characteristics and risks of options generally. The ODD, along with the Supplement, provides information regarding FLEX options sufficient to describe the special characteristics of these products. Rule. 9b-1 provides that an options market must file five preliminary copies of an amended ODD with the Commission at least 30 days prior to the date definitive copies of the ODD are furnished to customers, unless the Commission determines otherwise, having due regard for the adequacy of information disclosed and the protection of investors.^[5] The Commission has reviewed the Supplement, and finds that it is consistent with the protection of investors and in the public interest to allow the distribution of the Supplement as of the date of this order.

It is therefore ordered, pursuant to Rule 9b-1 under the Act,^[6] that the proposed Supplement regarding FLEX equity options (SR-ODD-00-01) is approved on an accelerated basis.

For the Commission, by the Division of Market Regulation, pursuant to delegated authority.^[7]

Jonathan G. Katz,

Secretary.

Footnotes

1.  17 CFR 240.9b-1.

2.  See Letter from James C. Yong, First Vice President and General Counsel, OCC, to Katherine A. England, Division of Market Regulation, Commission, dated March 1, 2000.

3.  The Commission approved these proposals after the Internal Revenue Service clarified the tax treatment of these options. See Release No. 34-42371 (January 31, 2000), 65 FR 5921 (February 7, 2000) (order approving SR-CBOE-99-63); Release No. 34-42389 (February 7, 2000), 65 FR 8224 (February 17, 2000) (order approving SR-PCX-00-01 and SR-Amex-00-02).

4.  17 CFR 240.9b-1.

5.  This provision is intended to permit the Commission either to accelerate or extend the time period in which definitive copies of a disclosure document may be distributed to the public.

6.  17 CFR 240.9b-1.

7.  17 CFR 200.30-3(a)(39).