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Rule 781. Allocation of Exercise Assignment Notices

This rule is no longer applicable effective February 17, 2009.

(a) Each member organization shall establish fixed procedures for the allocation of exercise notices assigned in respect of a short position in option contracts in such member organization's customers' account. Such allocation shall be on a "first in, first out" or automated random selection basis that has been approved by the Exchange or on a manual random selection basis that has been specified by the Exchange. Each member organization shall inform its customers in writing of the method it uses to allocate exercise notices to its customers' accounts, explaining its manner of operation and the consequences of that system.
(b) Each member organization shall report its proposed method of allocation to the Exchange and obtain the Exchange's prior approval thereof, and no member organization shall change its method of allocation unless the change has been reported to and been approved by the Exchange. The requirements of this paragraph shall not be applicable to allocation procedures submitted to and approved by another exchange having comparable standards pertaining to methods of allocation.
(c) Each member organization shall preserve for a three-year period sufficient work papers and other documentary materials relating to the allocation of exercise assignment notices to establish the manner in which allocation of such exercise notices is in fact being accomplished.

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