
[Federal Register: July 3, 2008 (Volume 73, Number 129)]
[Notices]               
[Page 38260]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr03jy08-106]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-58043; File No. SR-ODD-2008-02]

 
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 Stock and Index Options, Range Options and Delayed Start 
Options

June 26, 2008.
    On June 9, 2008, 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 on stock and broad-based indexes, 
range options and delayed start options (``DSOs'').\2\ On June 26, 
2008, the OCC submitted to the Commission five definitive copies of the 
supplement.\3\
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    \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 June 9, 2008.
    \3\ See letter from Jean M. Cawley, Senior Vice President and 
Deputy General Counsel, OCC, to Sharon Lawson, Senior Special 
Counsel, Division, Commission, dated June 25, 2008.
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    The ODD currently contains general disclosures on the 
characteristics and risks of trading standardized options. Recently, 
the Chicago Board Options Exchange, Incorporated (``CBOE'') amended its 
rules to permit the listing and trading of certain binary index 
options.\4\ The CBOE also recently amended its rules to permit the 
listing and trading of range options.\5\ The proposed supplement amends 
the ODD to accommodate these changes by providing disclosure regarding 
certain binary stock and index options, range options and DSOs.\6\
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    \4\ See Securities Exchange Act Release No. 57850 (May 22, 
2008), 73 FR 31169 (May 30, 2008) (SR-CBOE-2006-105). CBOE Rule 
22.3(a) permits it to trade binary options on any broad-based index 
that has been selected in accordance with CBOE Rule 24.2.
    \5\ See Securities Exchange Act Release No. 57376 (February 25, 
2008), 73 FR 11689 (March 4, 2008) (SR-CBOE-2007-104). CBOE Rule 
20.3(a) permits it to trade range options on any index that is 
eligible for options trading on CBOE.
    \6\ The proposed June supplement supersedes and replaces the 
April 2008 supplement to the ODD to accommodate the approval of 
trading of certain binary index options and range options. See notes 
4 and 5, supra. The April 2008 supplement contained disclosure on 
binary options on individual equity securities, including exchange-
traded funds, and DSOs, which were previously approved for trading 
by the Commission. See Securities Exchange Act Release No. 56251 
(August 14, 2007), 72 FR 46523 (August 20, 2007) (SR-Amex-2004-27) 
(order approving the listing and trading of binary options on 
individual stocks and exchange-traded funds, also known as fixed 
return options) and Securities Exchange Act Release No. 56855 
(November 28, 2007), 72 FR 68610 (December 5, 2007) (CBOE-2006-90) 
(order approving the listing and trading of DSOs).
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    Specifically, the proposed supplement to the ODD adds new 
disclosure regarding the characteristics of binary index options on 
broad-based indexes as well as the special risks of these binary index 
options. The proposed supplement to the ODD also adds new disclosure 
regarding the characteristics and special risks of range options. 
Finally, the proposed supplement makes disclosures regarding the 
characteristics and special risks of binary stock options and DSOs.\7\ 
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\
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    \7\ The Commission notes that the disclosure regarding binary 
stock options and DSOs in the proposed June supplement is 
substantially similar to that provided in the April 2008 supplement.
    \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 index options, range 
options and/or DSOs are made. Any future changes to the rules of the 
options markets concerning binary index options, range 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).
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    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. 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.
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    \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.
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    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-
2008-02), reflecting changes to disclosure regarding certain binary 
stock and index options, range options and DSOs may be furnished to 
customers as of the date of this order.
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    \11\ 17 CFR 240.9b-1.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(39).
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Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-15102 Filed 7-2-08; 8:45 am]

BILLING CODE 8010-01-P
