SR-NASD-2000-015

Margin Rule Amendments Relating to Options Positions

The NASD, through its wholly owned subsidiary, NASD Regulation, Inc., has filed with the SEC a proposed rule change to Rules 2520 and 2522 that will revise the margin requirements to: (1) expand the types of short options positions that would be considered "covered" in a cash account, specifically, certain short positions that are components of limited risk spread strategies, provided that any potential risk to the carrying broker/dealer is paid for in full and retained in the account; (2) allow an escrow agreement that conforms to NASD standards to serve in lieu of cash for certain spread positions held in a cash account; (3) permit "butterfly" and "box" spreads to be recognized as strategies for purposes of margin treatment, when such strategies result in a lower risk position; (4) recognize various hedging strategies involving stock paired with options positions and provide for lower maintenance margin requirements on the security component of these hedged positions; (5) permit extension of credit on certain long-term options and warrants with over nine months until expiration and on certain long box spreads; and (6) permit minimum margin requirements for a short put on a listed option to be the current value of the put plus a specified percentage of the put option's exercise price, and for a short put on an over-the-counter ("OTC") option to be a specified percentage of the put option's exercise price.