
[Federal Register: May 6, 2008 (Volume 73, Number 88)]
[Notices]               
[Page 25072-25073]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr06my08-124]                         

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-57744; File No. SR-ODD-2008-01]

 
Self-Regulatory Organizations; The Options Clearing Corporation; 
Order Granting Approval of Accelerated Delivery of Supplement to the 
Options Disclosure Document Reflecting Changes to Disclosure Regarding 
Certain Binary Options and Delayed Start Option Series; and Amendment 
to the Options Disclosure Document Front Cover Page To Update the 
Markets in Which Options Are Traded

April 30, 2008.
    On December 21, 2007, The Options Clearing Corporation (``OCC'') 
submitted to the Securities and Exchange Commission (``Commission''), 
pursuant to Rule 9b-1 under the Securities Exchange Act of 1934 
(``Act''),\1\ five preliminary copies of a supplement to its options 
disclosure document (``ODD'') reflecting changes to disclosure 
regarding certain binary options and delayed start option series 
(``DSOs'').\2\ The ODD would also be amended to update its front inside 
cover page so that it contains a current list of the U.S. exchanges 
that trade options issued by the OCC. On April 25, 2008, the OCC 
submitted to the Commission five definitive copies of the 
supplement.\3\
---------------------------------------------------------------------------

    \1\ 17 CFR 240.9b-1.
    \2\ See letter from Jean M. Cawley, Senior Vice President and 
Deputy General Counsel, OCC, to Sharon Lawson, Senior Special 
Counsel, Division of Trading and Markets (``Division''), Commission, 
dated December 20, 2007.
    \3\ See letter from Jean M. Cawley, Senior Vice President and 
Deputy General Counsel, OCC, to Sharon Lawson, Senior Special 
Counsel, Division, Commission, dated April 25, 2008.
---------------------------------------------------------------------------

    The ODD currently contains general disclosures on the 
characteristics and risks of trading standardized options. Recently, 
the American Stock Exchange, LLC amended its rules to permit the 
listing and trading of binary options on individual stocks and 
exchange-traded funds, also known as fixed return options.\4\ The 
Chicago Board Options Exchange, Incorporated amended its rules to 
permit the listing and trading of certain DSOs.\5\ The NASDAQ Stock 
Market LLC (``Nasdaq'') began trading options March 31, 2008.\6\ The 
proposed supplement amends the ODD to accommodate these changes by 
providing disclosure regarding certain binary options and DSOs, and to 
update the front cover page of the ODD.
---------------------------------------------------------------------------

    \4\ See Securities Exchange Act Release No. 56251 (August 14, 
2007), 72 FR 46523 (August 20, 2007) (SR-Amex-2004-27).
    \5\ See Securities Exchange Act Release No. 56855 (November 28, 
2007), 72 FR 68610 (December 5, 2007) (SR-CBOE-2006-90). CBOE Rule 
24.9(d)(1) permits it to trade DSOs on any security index approved 
for options trading on the CBOE.
    \6\ See Securities Exchange Act Release No. 57478 (March 12, 
2008), 73 FR 14521 (March 18, 2008) (order approving File Nos. SR-
NASDAQ-2007-004 and SR-NASDAQ-2007-080).
---------------------------------------------------------------------------

    Specifically, the proposed supplement to the ODD adds new 
disclosure regarding the characteristics of binary options on 
individual equity securities, which includes fund shares, as well as 
the special risks of these binary options other than credit default 
options.\7\ The proposed supplement to the ODD also adds new disclosure 
regarding the characteristics of DSOs and the risks associated with 
their purchase and sale. Finally, the ODD would be amended to add 
Nasdaq, which currently trades options issued by OCC, and its corporate 
address to the front cover page of the ODD. This change will ensure 
that the ODD accurately identifies the markets on which options 
currently trade. The proposed supplement is intended to be read in 
conjunction with the more general ODD, which, as described above, 
discusses the characteristics and risks of options generally.\8\
---------------------------------------------------------------------------

    \7\ As noted above, the proposed supplement provides disclosure 
that addresses binary options on individual stock options and 
exchange-traded fund shares. The Commission also notes that 
disclosure on credit default options, which are also binary options, 
is currently addressed in the ODD through the previously issued June 
2007 supplement. See Securities Exchange Act Release No. 55921 (June 
18, 2007), 72 FR 34495 (June 22, 2007) (SR-ODD-2007-03).
    \8\ The Commission notes that the options markets must continue 
to ensure that the ODD is in compliance with the requirements of 
Rule 9b-1(b)(2)(i) under the Act, 17 CFR 240.9b-1(b)(2)(i), 
including when future changes regarding binary options and/or DSOs 
are made. Any future changes to the rules of the options markets 
concerning binary options and/or DSOs would need to be submitted to 
the Commission under Section 19(b) of the Act. 15 U.S.C. 78s(b).
---------------------------------------------------------------------------

    Rule 9b-1(b)(2)(i) under the Act \9\ provides that an options 
market must file five copies of an amendment or supplement to the ODD 
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 information disclosed 
and the public interest and protection of investors.\10\ In addition, 
five copies of the definitive ODD, as amended or supplemented, must be 
filed with the Commission not later than the date the amendment or 
supplement, or the amended options disclosure document, is furnished to 
customers.

[[Page 25073]]

The Commission has reviewed the proposed supplement and finds, having 
due regard to the adequacy of information disclosed and the public 
interest and protection of investors, that the proposed supplement may 
be furnished to customers as of the date of this order.
---------------------------------------------------------------------------

    \9\ 17 CFR 240.9b-1(b)(2)(i).
    \10\ This provision permits the Commission to shorten or 
lengthen the period of time which must elapse before definitive 
copies may be furnished to customers.
---------------------------------------------------------------------------

    It is therefore ordered, pursuant to Rule 9b-1 under the Act,\11\ 
that definitive copies of the proposed supplement to the ODD (SR-ODD-
2008-01), reflecting changes to disclosure regarding binary options, 
DSOs and the front cover page, may be furnished to customers as of the 
date of this order.
---------------------------------------------------------------------------

    \11\ 17 CFR 240.9b-1.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
---------------------------------------------------------------------------

    \12\ 17 CFR 200.30-3(a)(39).
---------------------------------------------------------------------------

Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E8-9909 Filed 5-5-08; 8:45 am]

BILLING CODE 8010-01-P
