(iv) Where a put or call option or stock index warrant is issued, guaranteed or carried "short" in the account of a customer against a letter of guarantee, or in the case of a call, an "escrow receipt", that
(2) is issued by a third party custodian bank or trust company (the "custodian");
(3) either is held in the account at the time the put or call is written or is received in the account promptly thereafter; and
(4) in the case of an escrow receipt, is in compliance with the requirements of Rule 610 of The Options Clearing Corporation.
No margin need be required on the put or call.
In the case of a call option or warrant on index stock group, the letter of guarantee or escrow receipt must certify that the custodian holds for the account of the customer as security for the letter either (1) cash, (2) cash equivalents, (3) one or more qualified securities, or (4) any combination thereof, having an aggregate market value, computed as at the close of business on the day the call is written, of not less than 100% of the aggregate current index value computed as at the same time and that the custodian will promptly pay the member organization the exercise settlement amount in the event the account is assigned an exercise notice. The letter of guarantee or escrow receipt may provide for substitution of qualified securities held as collateral provided that the substitution shall not cause the value of the qualified securities held to be diminished. A qualified security means (1) an equity security, other than a warrant, right or option, that is listed on any national securities exchange, or (2) any equity security, other than a warrant, listed in the current list of Marginable Over-the-Counter Stocks as published by the Board of Governors of the Federal Reserve System.
In the case of a call option contract, the letter of guarantee or escrow receipt must certify that the custodian holds for the account of the customer as security for the letter, the underlying security (or a security immediately convertible into the underlying security without the payment of money) or foreign currency and that the custodian will promptly deliver to the member organization the underlying security or foreign currency in the event the account is assigned an exercise notice.
In the case of a put option contract (including a put on a broad index stock group option) or stock index warrant, the letter of guarantee must certify that the custodian holds for the account of the customer as security for the letter, cash or cash equivalents which have an aggregate market value, computed as at the close of business on the day the put is written, of not less than 100% of the aggregate exercise price of the put and that the guarantor will promptly pay the member organization the exercise settlement amount (in the case of a put on a broad index stock group) or the aggregate exercise price (in the case of any other put on an option contract) in the event the account is assigned an exercise notice. Cash equivalents shall mean securities issued or guaranteed by the United States and having a maturity of one year or less to maturity.
Exhibits I and II are the Exchange's prescribed forms of option deposit letters for puts and calls, respectively, on equity securities or U.S. Government securities. Exhibit III is the Exchange's prescribed form of option deposit letter for puts on indices.
Exhibit I
EQUITY/TREASURY
OPTION DEPOSIT LETTER
(PUT)
[Bank Letterhead]
______________
(Date)
To: ____________________________
(Broker/Dealer Name)
The undersigned (the "Bank") having an office located at________________________ hereby certifies and warrants that:
(i) it is a bank or trust company, doing business in corporate form, organized under the laws of United States or any State thereof and is supervised and examined by State or Federal authorities having supervision over banks or trust companies;
(ii) as escrow agent, it has on deposit in the United States for the account of ___________________ (the "Customer"), cash or cash equivalents meeting the requirements of Sec.220.8(a)(4)(i) of Regulation T of the Board of Governors of the Federal Reserve System (the Deposit) having an aggregate market value not less than $__________ (valuing cash equivalents at face value), which amount equals the product obtained by multiplying (a) the "aggregate exercise price," as that term is defined in the pertinent By-Laws of the Options Clearing Corporation (the "OCC"), of each option contract referred to below by (b) the number of such contracts referred to below; and
(iii) the Bank has received specific authorization from the Customer to issue this deposit letter and to hold the Deposit pursuant to the provisions hereof, in respect of the Customer's position (the "short position") as a writer of the following option contact(s):
Trade Date: |
Underlying Securities: |
|
|
|
|
|
Options Series |
Number of Contracts |
Option Type |
Expiration |
Aggregate Exercise Price Per Contact |
|
|
|
Month |
Year |
|
|
|
Put |
|
|
|
|
The Bank represents and convents that, in consideration of your carrying the above described option contract(s) "short" in the account of the Customer on your books, it will maintain the Deposit for your benefit in an account segregated on its books, separate and apart from all other accounts held by it, and will not subject nor consent to the Customer subjecting the Deposit or any portion thereof to any lien or encumbrance, or cause or permit the Deposit or any portion thereof to be applied to or used in satisfaction of any claim by the Bank (in any capacity whatsoever) against the Customer or any other person or entity or used by the Bank as an offset in whole or in part in any manner whatsoever. The Bank will use its beat efforts to promptly notify you if any notice of lien, levy, court order, or other process that may or purports to affect the Deposit or any portion thereof is served upon it.
The Customer shall have the right from lime to fee to deposit with the Bank, as escrow agent to be held by the Bank hereunder and subject to all of the provisions hereof cash or cash equivalents and thereupon to withdraw from the Deposit cash or cash equivalents which hive in aggregate market value of the cash or cash equivalents so deposited (valuing cash equivalents at face value), provided, however, that the aggregate market value of the Deposit immediately after such deposit and withdrawal shall not be less than the aggregate market value of the Deposit immediately prior to such events.
The Bank agrees that it will hold the Deposit in accordance with the terms hereof until this deposit letter is released or the Bank is directed to make payment as hereinafter provided.
Upon presentation of this deposit letter to the Bank at the address shown above, with the Endorsement of Release below that, in the Bank's reasonable belief, has been duly executed on your behalf, the Bank may release the Deposit held pursuant to this deposit letter to the Customer.
Upon (a) presentation of this deposit letter to the Bank at the address shown above, with the Payment Order below that, in the Bank's reasonable belief, has been duly executed on your behalf, and (b) delivery to the Bank for the account of the Customer of the securities underlying the above-described option contract(s), which securities shall be in form to constitute good delivery under the rules of the OCC, the Bank will pay you, out of the Depositor the proceeds thereof; the exercise settlement amount as to each of the option contracts described above, plus all applicable commission and other charges due you.
In the event of any cash or stock dividend, interest payment, stock distribution, stock split, rights offering, distribution, reorganization, recapitalization or reclassification, or other similar event, affecting the securities underlying the above-described option contract(s), the amount to be paid by the Bank to you and/or the securities or other property to be delivered by you to the Bank shall be adjusted as may be required by the OCC.
The Bank has been authorized by the Customer to confirm the Customer's understanding that if the short position described above is closed out, it is the Customer's responsibility to ensure that this deposit letter is released by you, and until this deposit letter is so released, you shall retain the right to demand payment upon the assignment of an exercise notice to any short position in a series of options identified above carried in the Customer's account.
If the Customer is the Bank acting in a fiduciary or similar capacity, or is a trust, custodial, or similar account maintained with the Bank, it is nonetheless understood that is issuing this deposit letter and as escrowee and bailee of the Deposit, the Bank is acting in its general capacity. Nothing herein shall be deemed to require the Bank to make payment in contravention of any court order or judgment binding on the Bank in its capacity as escrowee and bailee hereunder, which on its face affects the Deposit or the proceeds thereof.
Bank______________________________________________________
By_______________________________
Date _____________________
(Authorized Signature)
ENDORSEMENT OF RELEASE (to be completed by the Broker/Dealer)
The undersigned hereby releases all rights of the undersigned with respect to this Option Deposit Letter.
_____________________________________
(Broker/Dealer)
By_________________________________
Date______________________________
PAYMENT ORDER (to be completed by the Broker/Dealer)
The undersigned hereby (1) certifies to the above-named Bank that an exercise notice filed with the Options Clearing Corporation has been assigned to the short position of the undersigned which includes the option contract(s) described above, (2) delivers to the Bank the securities underlying the above-described option contract(s), and (3) demands payment that will settle such assignment, plus applicable commissions and other charges, in the amount of $_________.
_________________________________
(Broker/Dealer)
By________________________________
Date__________________________
Exhibit II
EQUITY/TREASURY
OPTION DEPOSIT LETTER
(CALL)
[Bank Letterhead]
_________________________
(Date)
To: _______________________________
(Broker/Dealer Name)
The undersigned (the "Bank"), having an office located at___________________, hereby certifies and warrants that:
(i) it is a bank or trust company, doing business in corporate form, organized under the laws of the United States or any State thereof and is supervised and examined by State or Federal authorities having supervision over banks or trust companies;
(ii) as escrow agent, it has on deposit in the United States for the account of ________________________ (the "Customer"), in form to constitute good delivery under the rules of the Options Clearing Corporation (the "OCC"), the securities that underlie the option contract(s) described below or other securities which are immediately convertible into or exchangeable for such securities without the payment of money (which right to convert or exchange does not expire on or before the expiration date of the option contract(s) described below), such deposited securities being hereinafter referred to as the Deposited Securities; and
(iii) the Bank has received specific authorization from the Customer to issue this deposit letter and to hold the Deposited Securities pursuant to the provisions hereof, in respect of the Customer's position (the "short position") as a writer of the following option contract(s):
Trade Date: |
Underlying Securities: |
|
|
|
|
|
Options Series |
Number of Contracts |
Option Type |
Expiration |
Aggregate Exercise Price Per Contact |
|
|
|
Month |
Year |
|
|
|
Call |
|
|
|
|
The Bank represents and covenants that, in consideration of your carrying the above described option contract(s) "short" in the account of the Customer on your books, it will maintain the Deposited Securities (or other securities satisfying the definition of Deposited Securities set forth above, which other securities, upon deposit with the Bank, shall be included within the term Deposited Securities as hereinafter referred to) for your benefit in an account segregated on its books, separate and apart form all other accounts held by it, and will not subject nor consent to the Customer subjecting the Deposited Securities or any portion thereof to any lien or incumbrance, or cause or permit the Deposited Securities or any portion thereof to be applied to or used in satisfaction of any claim by the Bank (in any capacity whatsoever) against the Customer or any other person or entity or used by the Bank as an offset in whole or in part in any manner whatsoever. The Bank will use its best efforts to promptly notify you if any notice of lien, levy, court order, or other process that may or purports to affect the Deposited Securities or any portion thereof is served upon it.
The Bank agrees that it will hold the Deposited Securities in accordance wall the terms hereof until this deposit letter is released or the Bank is directed to make delivery as hereinafter provided.
Upon the presentation of this deposit letter to the Bank at the address shown above, with the Endorsement of Release below that, in the Banks reasonable belief has been duly executed on your behalf, the Bank may release the Deposited Securities held pursuant to this deposit letter to the Customer.
Upon presentation of this deposit letter to the Bank at the address shown above, with the Payment Order below that, in the Bank's reasonable belief has been duly executed on your behalf, and delivery to the Bank of an amount equal to the product of (a) the aggregate exercise price per contract described above, times (b) the number of option contracts described above, minus ail applicable commissions and other charges due you, the Bank will deliver the Deposited Securities to you for the account of the Customer.
In the event of any cash or stock dividend, interest payment, stock distribution, stock split, rights offering, distribution, reorganization, recapitalization or reclassification, or other similar event affecting the securities underlying the above-described option contract(s), the amount to be paid by you to the Bank and/or the securities or other property to be delivered by the Bank to you shall be adjusted as may be required by the OCC.
The Bank has been authorized by the Customer to confirm the Customer's understanding that if the short position described above is closed out, it is the Customer's responsibility to ensure that this deposit letter is released by you, and until this deposit letter is so released, you shall retain the right to demand delivery of the Deposited Securities as herein provided upon the assignment of an exercise notice to any short position in a series of options identified above carried in the Customer's account.
If the Customer is the Bank acting in a fiduciary or similar capacity, or is a trust, custodial, or similar account maintained with the Bank, it is nonetheless understood that in issuing this deposit letter and functioning as escrowee and bailee of the Deposited Securities, the Bank is acting in its general capacity. Nothing herein shall be deemed to require the Bank to make delivery in contravention of any court order or judgment binding on the Bank in its capacity as escrowee and bailee hereunder, which on its face affects the Deposited Securities or the proceeds thereof.
Bank _______________________________________________________
By_____________________________
Date________________________
(Authorized Signature)
ENDORSEMENT OF RELEASE (to be completed by the Broker/Dealer)
The undersigned hereby releases all rights of the undersigned with respect to this Option Deposit Letter.
_____________________________
(Broker/Dealer)
By________________________
Date_________________________
PAYMENT ORDER (to be completed by the Broker/Dealer)
The undersigned hereby (1) certifies to the above-named Bank that an exercise notice filed with the Options Clearing Corporation has been assigned to the short position of the undersigned which includes the option contract(s) described above, (2) delivers to the Bank an amount equal to the product of (a) the aggregate exercise price per contract described above, times (b) the number of option contracts described above, minus all applicable commissions and other charges due the undersigned, and (3) demands delivery of the Deposited Securities sufficient to permit the undersigned to settle such assignment.
_____________________________
(Broker/Dealer)
By_________________________________
Date______________________________
EXHIBIT III
MARKET INDEX
OPTION DEPOSIT LETTER
(PUT)
[Bank Letterhead]
_______________
(Date)
To: ____________________________________
(Broker/Dealer Name)
The undersigned (the "Bank"), having in office located at___________________, hereby certifies and warrants that:
(i) it is a bank or trust company, doing business in corporate form, organized under the laws of the United States or any State thereof and is supervised and examined by State or Federal authorities having supervision over banks or trust companies;
(ii) as escrow agent, it has on deposit in the United States for the account of _________________________(the "Customer"), cash or cash equivalents meeting the requirements of Section 220.8(a)(4)(i) of Regulation T of the Board of Governors of the Federal Reserve System (the "Deposit") having an aggregate market value not less than $____________(valuing cash equivalents at face value), which amount equals the product obtained by multiplying (a) the "aggregate exercise price," as that term is hereinafter defined, of each market index option contract referred to below by (b) the number of such contracts referred to below; and
(iii) the Bank has received specific authorization from the Customer to issue this deposit letter and to hold the Deposit pursuant to the provisions hereof, in respect of the Customer's position (the "short position") as a writer of the following market index option contract(s):
Trade Date: |
Underlying Index: |
|
|
|
|
|
Options Series |
Number of Contracts |
Option Type |
Expiration |
Aggregate Exercise Price Per Contact |
|
|
|
Month |
Year |
|
|
|
Put |
|
|
|
|
The Bank represents and covenants that, in consideration of your carrying the above described market index option contract(s) "short" in the account of the Customer on your books, it will maintain the Deposit for your benefit in an account segregated or its books, separate and apart from all other accounts held by it, and will not subject nor consent to the Customer subjecting the Deposit or any portion thereof to any lien or encumbrance, or cause or permit the Deposit or any portion thereof to be applied to or used in satisfaction of any claim by the Bank (in any capacity whatsoever) against the Customer or any other person or entity or used by the Bank as an offset in whole or in part in any manner whatsoever. The Bank will use its best efforts to promptly notify you if any notice of lien, levy, court order, or other process that mayor purports to affect the Deposit or any portion thereof is served upon it.
The Customer shall have the right from tune to time to deposit with the Bank, as escrow agent to be held by the Bank hereunder and subject to all of the provisions hereof, cash or cash equivalents and thereupon to withdraw from the Deposit cash or cash equivalents which have an aggregate market value of the cash or cash equivalents so deposited (valuing cash equivalents at face value), provided, however, that the aggregate market value of the Deposit immediately after such deposit and withdrawal shall not be less than the aggregate market value of the Deposit immediately prior to such events.
The Bank agrees that it will hold the Deposit in accordance with the terms hereof until this deposit letter is released or the Bank is directed to make payment as hereinafter provided.
Upon presentation of this deposit letter to the Bank at the address shown above, with the Endorsement of Release below that, in the Bank's reasonable belief, has been duty executed on your behalf, the Bank may release the Deposit held pursuant to this deposit letter to the Customer.
Upon presentation of this deposit letter to the Bank at the address shown above, with the Payment Order Wow that, in the Bank's reasonable belief, hat been duly executed on your behalf the Bank will pay you, out of the Deposit or the proceeds thereof, the exercise settlement amount as to each of the market index option contract) described above, which, as to each such contract, shall be the amount by which the "aggregate exercise price" of such contract it greater than the "aggregate current index value" of the underlying index (as those quoted terms are defined in the pertinent By-Laws of the Options Clewing Corporation), plus all applicable commissions and other charges due you.
The Bank has been authorized by the Customer to confirm the Customer's understanding that if the short position described above is closed out, it is the Customer's responsibility to ensure that this deposit letter it released by you, and until this deposit letter is so released, you shall retain the right to demand payment upon the assignment of an exercise notice to any short position in a series of options identified above carried in the Customer's account.
If the Customer is the Bank acting in a fiduciary or similar capacity, or is a trust, custodial, or similar account maintained with the Bank, it is nonetheless understood that in issuing this deposit letter and functioning as escrowee and bailee of the Deposit, the Bank is acting in its general capacity. Nothing herein shall be deemed to require the Bank to make payment in contravention of any court order or judgment binding on the Bank in its capacity as escrowee and bailee hereunder, which on its face affects the Deposit or the proceeds thereof.
Bank________________________________________________________
By________________________________(Authorized Signature)
Date______________________________
ENDORSEMENT OF RELEASE (to be completed by the Broker/Dealer)
The undersigned hereby releases all rights of the undersigned with respect to this Market Undo Option Deposit Letter.
_______________________________
(Broker/Dealer)
By _______________________________ Date______________________
PAYMEMT ORDER (to be completed by the Broker/Dealer)
The undersigned hereby (1) certifies to the above-named Bank that an exercise notice filed with the Options Clearing Corporation has been assigned to the short portion of the undersigned which includes the option market index contract(s) described above and (2) demands payment that will settle such assignment, plus applicable commissions and other charges due, m the amount of $ _____________.
_______________________________
(Broker/Dealer)
By_______________________________ Date________________________________
Exhibit IV
MARKET INDEX
OPTION DEPOSIT LETTERS
(CALL)
______________________(Date)
To: _______________________________
(Broker/Dealer Name)
The undersigned (the "Bank"), having an office located at _______________________________, hereby certifies and warrants to you ("Broker/Dealer") that:
(i) it is a bank or trust company, doing business in corporate form, organized under the laws of the United States or any state thereof and is supervised and examined by State or Federal authorities having supervision over banks or trust companies;
(ii) as escrow agent, it has on deposit in the United States for the account of _____________________________________________ (the "Customer"), (a) cash, (b) cash equivalents meeting the requirements of Regulation T of the Board of Governors of the Federal Reserve System, (c) one or more qualified securities as defined in New York Stock Exchange Rule 431(f)(2)(H)(iv), or (d) any combination thereof (the "Deposit");
(iii) the aggregate market value of the Deposit, computed as of the close of business on the trade date referred to below (valuing cash equivalents at face value and qualified securities at their last sale price, as reported on such trade date pursuant to an effective transaction reporting plan as defined in Rule 11Aa3-1 under the Securities Exchange Act of 1934 or their last bid price, if not subject to East sale reporting) was not less than the aggregate current index value set forth In the table below;
(iv) to the extent the Deposit includes securities such securities are in good deliverable form, or the Bank has the unrestricted power to put such securities into good deliverable form, in accordance with the requirements of the primary market for such securities and the Customer has duly authorized the Bank to liquidate such securities to the extent necessary to perform the Banks obligations thereunder; and
(v) the Bank has reserved written affirmation from the Customer that alt index call options covered by this deposit letter are written against a diversified stock portfolio and has also received specific authorization from the Customer to issue this deposit letter and to hold the Deposit pursuant to the provisions hereof, in respect of the Customer's position (the "short position") as a writer of the over-the-counter call option contract on the underlying Index referred to below:
Trade Date: |
Expiration Date: |
Underlying Index: |
Number of Contracts |
Option Type |
Aggregate Current Index Value |
Index Multiplier |
Exercise Price |
|
Call |
$ |
|
|
The Bank represents and covenants that, in consideration of Broker/Dealer carrying the above described index option contract(s) 'short' in the account of the Customer on Broker/Dealer's books, it will maintain the Deposit for Broker/Dealer's benefit in an account segregated on is books, separate end apart from all other accounts held by it, and will not subject nor consent to the Customer subjecting the Deposit or any portion thereof to any lien or encumbrance, or cause or permit the Deposit in any portion thereof to be applied to or used in satisfaction of any claim by the Bank (in any capacity whatsoever) against the Customer or any other person or entity or used by the Bank as an offset in whole or part in any manner whatsoever. The Bank will use its best efforts to promptly notify Broker/Dealer if any notice of lien, levy, court order, or other process that may or purports to affect the deposit or any portion thereof is served upon it.
The Customer shall have the right from time to time to deposit with the Bank, as escrow agent to be held by the Bank hereunder and subject to all the provision hereof, cash, cash equivalents, or qualified securities as described in clause (ii) above and thereupon to withdraw from the Deposit cash, cash equivalents, or qualified securities which have an aggregate market value not exceeding the market value of the cash, cash equivalents, or qualified securities so deposited, with the result that the aggregate market value of the Deposit immediately after such deposit and withdrawal shall not be less than the aggregate market value of the Deposit immediately prior to such events. For purposes of this paragraph, aggregate market value shall be determined in the manner indicated in clause (iii) above, except that qualified securities shall be valued as of the close of business on the preceding business day of the date of such deposit and withdrawal.
Upon the requested the Broker/Dealer, the Bank will promptly provide the Broker/Dealer with a written listing of the cash, cash equivalents, and/or qualified securities included in the Deposit. If at any time the current aggregate market value of the Deposit shall be less than the greater of either (a)55% of the product of (A) the number of contracts indicated above and (B) the aggregate current index value of the underlying index determined on the immediately preceding business day (such product being the "Current Index Amount") or 130% of the aggregate Exercise Settlement Amount (as defined in Rule 431(f)(2) of The New York Stock Exchange) of option contracts referred to herein, the Bank shall promptly notify the Broker/Dealer and the Customer in writing of such fact end request that the Customer supplement the Deposit. As used herein, the term "aggregate current index value" means the "current index value" as such term is defined by the By-Laws of The Options Clearing Corp., multiplied by the "Index Multiplier" in the above table.
If at any time the current aggregate market value of the Deposit shall at any time be less than the greater of either (x) 50% of the Current Index Amount or (y) 120% of the Exercise Settlement Amount of option contracts referred to herein, whether or not a request to the Customer for supplementation is then pending, the Bank will immediately advise the Broker/Dealer in writing thereof. For purposes of determining the market value of the Deposit qualified securities shall be valued as of the close of business on the preceding business day.
If any cash equivalent or qualified security shall cease to meet the requirements of clause (ii) above, such cash equivalents or qualified security shall be assigned no value for purposes of determining current aggregate market value pursuant to this paragraph.
The Bank agrees that it will hold the Deposit in accordance with the terms hereof until this deposit letter is released or the Bank is directed to make delivery as hereinafter provided. Upon presentation of this deposit letter to the Bank at the address shown above, with the Endorsement of Release below that, in the Banks reasonable belief, has been duly executed on Broker/Dealer's behalf, the Bank may release the Deposit held pursuant to this deposit letter to the Customer.
Upon presentation of this deposit letter to the Bank at the address shown above, with the Payment Order below that, in the Bank's reasonable belief has been duly executed on Broker/Dealer behalf, the Bank will pay Broker/Dealer, out of the Deposit or the proceeds thereof, the Exercise Settlement Amount as to each of the market index option contracts described above, plus all applicable commissions and other charges due Broker/Dealer.
The Bank has been authorized by the Customer to confirm the Customer's understanding that if the short position described above is closed out, it is the Customer's responsibility to ensure that this deposit letter is released by the Broker/Dealer, and until this deposit letter is so released, the Broker/Dealer shall retain the right to demand payment upon the assignment of any Exercise Notice to any short position in a series of options identified above carried in the Customer's account.
If the Customer is the Bank acting in a fiduciary or similar capacity, or is a trust, custodial, or similar account maintained with the Bank, it is nonetheless understood that in issuing this deposit letter and functioning as escrowee and bailee of the Deposit, the Bank is acting in its general capacity. Nothing herein shall be deemed to require the Bank to make delivery in contravention of any court order or judgment binding on the Bank in its capacity as escrowee and bailee hereunder, which on its face effects the Deposit or the proceeds thereof.
Bank________________________________________________________
By___________________________________(Authorized Signature)
Date______________________
ENDORSEMENT OF RELEASE (to be completed by the Broker/Dealer)
The undersigned hereby releases all rights of the undersigned with respect to this OTC Index Option Deposit letter.
___________________________
(Broker/Dealer)
By___________________________ Date____________________________
PAYMENT ORDER (to be completed by the Broker/Dealer)
The undersigned hereby (1) certifies to the above-named Bank that it has, as holder, exercised the OTC call option contracts referred to above and (2) demands payment that will settle such exercise, plus applicable commissions and other charges due, in the amount of $
________________.
___________________________
(Broker/Dealer)
By___________________________ Date_________________