SEC Approves FINRA Rule Changes Related to OCC Cleared OTC Options (with Lofchie Comment)

The SEC approved proposed rule changes to FINRA Rule 2360 ("Options") and Rule 4210 ("Margin Requirements") relating to the treatment of over-the-counter ("OTC") options cleared by the Options Clearing Corporations ("OCC"). The amendments to Rule 2360 treat OCC Cleared OTC Options as conventional options (rather than as "standardized"; i.e., exchange-listed) for purposes of the rule, and amend certain of the definitions in the rule, among other changes. The amendments to Rule 4210 include changes to certain definitions in order to provide for the same margin treatment for OCC Cleared OTC Options as is afforded other cleared and guaranteed options.

Lofchie Comment: The rule proposal generally describes the differences, which are not that significant overall, between the regulatory requirements applicable to standardized and conventional options. It is likely a worthwhile exercise for a firm to review its options compliance manual to confirm that its treatment of the different types of options conforms to the requirements set out in the rule changes.

See: SEC Order of Approval. Related News:FINRA: Proposed Rule Change Relating to Amendments to FINRA Rules 2360 and 4210 in Connection with OCC Cleared Over-the-Counter Options (June 21, 2013); Options Clearing Corporation: Proposed Rule Change Relating to the Clearance and Settlement of Over-the-Counter Options (September 18, 2012).