Supplement to the Options Disclosure Document
May 9, 2007
On May 3, 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 reflects certain changes in The Options Clearing Corporation's (the OCC) rules and the rules of certain options markets, as more fully described below:
As with other supplements to the ODD, this supplement should be read in conjunction with the current ODD titled Characteristics and Risks of Standardized Options.
NASD Rule 2860(b)(11) requires that a member deliver the current ODD, as amended to include this supplement, 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 ways:
Members are reminded that they may electronically transmit documents that they are required to furnish to customers under NASD rules, including the ODD and amendments thereto, provided the member adheres to the standards contained in the May 1996 and October 1995 Securities Exchange Commission Releases2 and as discussed in Notice to Members 98-3 (January 1998).
Please see the SEC approval order, the ODD supplement and NASD Rule 2860(b)(11) for additional information.
1 In this instance, the supplement pertains to all options issued by the OCC; accordingly, the supplement must be delivered not later than the time a confirmation of any OCC issued option is delivered to the customer.
2 See Securities Act Release No. 7288 (May 9, 1996) 61 FR 24644 (May 15, 1996) and Securities Act Release No. 7233 (October 6, 1995) 60 FR 53458 (October 13, 1995).