Supplement to the Options Disclosure Document

June 26, 2007

 

On June 18, 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 relating to the purchase and sale of, and adjustments made to, credit default options (including credit default basket options). 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:

 

  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 a transaction in the category of options to which the amendment pertains is delivered to such customer.

 

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 Releases,1 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 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).