[Federal Register Volume 80, Number 84 (Friday, May 1, 2015)]
[Notices]
[Pages 24985-24986]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-10136]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-74813; File No. SR-ODD-2015-01]
Self-Regulatory Organizations; The Options Clearing Corporation;
Order Granting Approval of Accelerated Delivery of Supplement to the
Options Disclosure Document Reflecting the Inclusion of Disclosure
Regarding Foreign Currency Index Options and Changes to Disclosure
Regarding Implied Volatility Index Options
April 27, 2015.
On May 20, 2014, the Options Clearing Corporation (``OCC'')
submitted to the Securities and Exchange Commission (``Commission''),
pursuant to Rule 9b-1 under the Securities Exchange Act of 1934
(``Act''),\1\ five preliminary copies of a supplement to amend the
options disclosure document (``ODD'') to include disclosure regarding
foreign currency index options and amend disclosure regarding implied
volatility index options (``April 2015 Supplement'').\2\ On April 15,
2015, the Commission received from the OCC five definitive copies of
the April 2015 Supplement.\3\
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\1\ 17 CFR 240.9b-1.
\2\ See email from Jean M. Cawley, SVP and Deputy General
Counsel, OCC, to Sharon Lawson, David Michehl, and Yue Ding,
Division of Trading and Markets (``Division''), Commission, dated
May 20, 2014.
\3\ See letter from Jean M. Cawley, Senior Vice President and
Deputy General Counsel, OCC, to Sharon Lawson, Senior Special
Counsel, Division, Commission, dated April 14, 2015. The April 2015
Supplement also makes certain technical, non-substantive amendments
to the ODD.
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Foreign Currency Index Options
Currently, the ODD states that indexes that may underlie options
include stock indexes, variability indexes, strategy-based indexes,
dividend indexes, and relative performance indexes. In April 2013, the
Commission approved a proposed rule change by the International
Securities Exchange, LLC (``ISE'') to list options on the Dow Jones
FXCM Dollar Index.\4\ The April 2015 Supplement amends disclosures in
the ODD to add foreign currency indexes as a type of index that can
underlie an option, in order to accommodate the trading of options on
the Dow Jones FXCM Dollar Index and similarly structured foreign
currency indexes.\5\ Specifically, the April 2015 Supplement adds new
disclosure regarding the characteristics of foreign currency index
options and their special risks. In addition, the supplement adds an
example of the calculation of a foreign currency index. The supplement
also amends disclosures in the ODD to accommodate the fact that
components of foreign currency indexes are foreign currencies rather
than securities (e.g., by referring to ``components'' of an index
rather than ``constituent securities'' of an index).
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\4\ See Securities Exchange Act Release No. 69365 (April 11,
2013), 78 FR 23321 (April 18, 2013) (SR-ISE-2013-14).
\5\ The April 2015 Supplement is intended to accommodate the
trading of options on foreign currency indexes that reflect the
value of one currency, often the U.S. dollar, against a basket of
foreign currencies. Foreign currency indexes are calculated using
exchange rates.
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Implied Volatility Index Options
The ODD currently contains general disclosures on the
characteristics and risks of trading standardized options on
variability indexes. The ODD states that variability indexes are
indexes intended
[[Page 24986]]
to measure the implied volatility, or the realized variance or
volatility, of specified stock indexes or specified securities. In
January 2014, the Commission approved a proposed rule change by the ISE
to list options on the Nations VolDex Index.\6\ The April 2015
Supplement amends disclosures in the ODD regarding implied volatility
index options to accommodate the listing of options on the Nations
VolDex Index and similarly structured implied volatility indexes.\7\
Specifically, the April 2015 Supplement amends the discussion of
implied volatility index options by including disclosure regarding
exercise settlement value calculations that use the mid-point of the
bid and offer of the index components and the risks of the different
calculation methodologies. The supplement also provides disclosure
regarding the types of options that can be used to calculate implied
volatility indexes (i.e., out-of-the-money option series and
hypothetical at-the-money option series; options with certain
expiration months or weeks; number of days the options have until
expiration).
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\6\ See Securities Exchange Act Release No. 71365 (January 22,
2014), 79 FR 4512 (January 28, 2014) (SR-ISE-2013-42).
\7\ The exercise settlement value for the Nations VolDex Index
is calculated using the mid-point of the NBBO for the component
options of the index, whereas most other index settlement values are
calculated using transaction prices of the index components.
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The April 2015 Supplement is intended to be read in conjunction
with the more general ODD, which discusses the characteristics and
risks of options generally.\8\
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\8\ The Commission notes that the options markets must continue
to ensure that the ODD is in compliance with the requirements of
Rule 9b-1(b)(2)(i) under the Act, 17 CFR 240.9b-1(b)(2)(i),
including when changes regarding foreign currency index options and
implied volatility index options are made in the future. Any future
changes to the rules of the options markets concerning foreign
currency index options and implied volatility index options would
need to be submitted to the Commission under Section 19(b) of the
Act. 15 U.S.C. 78s(b).
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Rule 9b-1(b)(2)(i) under the Act \9\ provides that an options
market must file five copies of an amendment or supplement to the ODD
with the Commission at least 30 days prior to the date definitive
copies are furnished to customers, unless the Commission determines
otherwise, having due regard to the adequacy of the information
disclosed and the public interest and protection of investors.\10\ In
addition, five copies of the definitive ODD, as amended or
supplemented, must be filed with the Commission not later than the date
the amendment or supplement, or the amended ODD, is furnished to
customers. The Commission has reviewed the April 2015 Supplement, and
the amendments to the ODD contained therein, and finds that, having due
regard to the adequacy of the information disclosed and the public
interest and protection of investors, the supplement may be furnished
to customers as of the date of this order.
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\9\ 17 CFR 240.9b-1(b)(2)(i).
\10\ This provision permits the Commission to shorten or
lengthen the period of time which must elapse before definitive
copies may be furnished to customers.
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It is therefore ordered, pursuant to Rule 9b-1 under the Act,\11\
that definitive copies of the April 2015 Supplement to the ODD (SR-ODD-
2015-01), reflecting the inclusion of disclosure regarding foreign
currency index options and changes to disclosure regarding implied
volatility index options, may be furnished to customers as of the date
of this order.
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\11\ 17 CFR 240.9b-1.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\12\
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\12\ 17 CFR 200.30-3(a)(39).
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Brent J. Fields,
Secretary.
[FR Doc. 2015-10136 Filed 4-30-15; 8:45 am]
BILLING CODE 8011-01-P