The SEC approved a supplement to the Options Disclosure Document (ODD), which amends the discussion of variability index options.  The 3/31/11 supplement provides disclosure regarding the characteristics of options on equity-based volatility indexes and their special risks.  The supplement also adds new disclosures re: characteristics of options on relative performance indexes and their special risks.  Finally, the supplement updates the ODD inside front cover so that it contains a current list of the U.S. exchanges that trade options issued by The Options Clearing Corporation.  As with other supplements to the ODD, this should be read in conjunction with the current ODD, Characteristics and Risks of Standardized Options.

        Broker-Dealer Obligations.   SEA Rule 9b-1 requires B/D's to deliver the ODD and supplements to customers.  FINRA Rule 2360(b)(11)(A)(1) has similar requirements - with delivery to each customer at or before the time the customer is approved to trade options.  In addition, FINRA Rule 2360(b)(11)(A)(1) requires firms to distribute a copy of each ODD supplement to customers who previously received the ODD.  Firms must deliver the ODD supplements no later than the time a customer receives a confirmation of a transaction in the category of options to which the supplement pertains. 

To comply with the FINRA requirements, firms may distribute the ODD supplement in various ways, including, but not limited to, one of the following:

• mass mailing the supplement to all of its customers approved to trade options who have already received the ODD;  or,
• distributing the supplement to a customer who already has received the ODD not later than the time a customer receives a confirmation of a transaction in the category of options to which the amendment pertains.

• Firms may electronically transmit the ODD and supplements thereto, provided they adhere to the standards contained in the May 1996 and October 1995 SEC Releases, and as discussed in NtM 98-03. 
• Firms also may transmit the ODD and supplements to customers who have consented to electronic delivery through the use of a hyperlink.

       FINRA Staff Contact.   Kathryn Moore, Office of General Counsel;  (202) 974-2974.  

For further details, go to:   [FINRA InfoNotice, 4/20/11]