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Daily Rules, Proposed Rules, and Notices of the Federal Government

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-58604; File No. SR-ODD-2008-04]

Self-Regulatory Organizations; the Options Clearing Corporation; Order Granting Approval of Accelerated Delivery of Supplement to the Options Disclosure Document Reflecting Changes to Disclosure Regarding Certain Variability Index Options, Strategy-Based Index Options, and Adjustments of Stock Option Contracts

On August 21, 2008, 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 its options disclosure document ("ODD") reflecting changes to disclosure regarding certain options on variability indexes2 and strategy-based indexes and adjustments of stock option contracts, among other changes.3 On September 19, 2008, the OCC submitted to the Commission five definitive copies of the supplement.4

The ODD currently contains general disclosures on the characteristics and risks of trading standardized options. Recently, the Chicago Board Options Exchange, Incorporated ("CBOE") amended its rules to permit the listing and trading of realized variance and realized volatility index options.5 The CBOE also recently amended its rules to permit the listing and trading of certain strategy-based index options, specifically options that overlie an index that is equal to1/10th of the value of the CBOE S&P 500 BuyWrite Index ("BXM options").6 The proposed supplement amends the ODD to accommodate these changes by providing disclosure regarding realized variance index options, realized volatility index options, and strategy-based index options.7

Specifically, the proposed supplement to the ODD adds new disclosure regarding the characteristics of realized variance and realized volatility index options as well as the special risks of these options. The proposed supplement to the ODD also adds new disclosure regarding the characteristics and special risks of strategy-based index options. The proposed supplement is intended to be read in conjunction with the more general ODD, which, as described above, discusses the characteristics and risks of options generally.8

The proposed supplement also is revised to: (1) Accommodate a change in the application of the new methodology for adjusting equity options for cash dividends;9 (2) add new language to describe reduced-value index options;10 and (3) delete a paragraph regarding the NASDAQ Stock Market LLC's ("Nasdaq") opening and closing procedure, which has become outdated and inaccurate.11

Rule 9b-1(b)(2)(i) under the Act12 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 information disclosed and the public interest and protection of investors.13 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 options disclosure document, is furnished to customers. The Commission has reviewed the proposed supplement and finds, having due regard to the adequacy of information disclosed and the public interest and protection of investors, that the proposed supplement may be furnished to customers as of the date of this order.

It is therefore ordered,pursuant to Rule 9b-1 under the Act,14 that definitive copies of the proposed supplement to the ODD (SR-ODD-2008-03), reflecting changes to disclosure regarding certain options on variability indexes and strategy-based indexes, as well as the other changes noted above, may be furnished to customers as of the date of this order.

For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.15

1517 CFR 200.30-3(a)(39).

Florence E. Harmon, Acting Secretary.
ACTION: 1417 CFR 240.9b-1.