Supplement to the Options Disclosure Document

April 11, 2007

 

On April 4, 2007, the SEC approved a supplement to the Options Disclosure Document (ODD). The ODD contains general disclosures on the characteristics and risks of trading standardized options. The recently approved supplement to the ODD provides additional disclosures regarding rate-modified cash-settled foreign currency options. As with other supplements to the ODD, this supplement should be read in conjunction with the current ODD entitled Characteristics and Risks of Standardized Options. This supplement supersedes and replaces the January 2007 supplement to the ODD, which relates to U.S. dollar-denominated foreign currency options, as described in the NASD Member Alert dated February 7, 2007.

NASD Rule 2860(b)(11) requires that a member deliver the current ODD to each customer at or prior to the time the customer is approved to trade options. In addition, the rule provides that a member must distribute a copy of each amendment to the ODD to each customer to whom the member previously delivered the ODD. Members may distribute the amendment in various ways including, but not limited to, one of the following:

  1. A firm may choose to conduct a mass mailing of the supplement to all of its customers approved to trade options who have already received the ODD; or

  2. A firm may distribute the supplement to a customer, who has already received the ODD, not later than the time a confirmation of an option transaction involving rate-modified cash-settled foreign currency options is delivered to such customer.
Please see the SEC approval order, the ODD supplement and NASD Rule 2860(b)(11) for additional information.