EFTA01393177.pdf

level that might not reflect the true state of the market at the time. The paragraph numbered 10 beginning on page 78 of the Booklet is replaced with the following paragraph: 10. The purchase and sale of index options in for- eign markets at times when U.S. markets are closed may present special risks. Although an underlying index may be based on securities primarily traded in U.S. markets, the index levels reported In foreign options markets at such times may be based on the trading of some or all of the constituent securities in foreign markets, and, in any case. option premiums in the foreign market will not reflect current prices of the constituent securities in U.S. markets. In addition. if a cash-settled index option (other than a binary index option) is exercised through the for- eign office of a brokerage firm on a day when U.S. mar- kets we closed. the exercise settlement value of the option will not be known until the time fixed for determin- ing exercise settlement values on the next day on which U.S. markets are open. The corresponding risks would apply to the trading in U.S. markets of options based on indexes of securities primarily traded in foreign markets. The following new paragraph is inserted on page 78 of the Booklet immediately before the section in Chapter X titled "Special Risks of Debt Options": 15. Holders and writers of delayed start options bear the risk tat the index level used to calculate the exercise price on the exercise price setting date may be unavailable or incorrect or that the options m,w,ket may incorrectly calculate the exercise price. Paragraph 5 of this section discusses some of the risks of an errone- ously reported index level to a person buying, selling, or exercising an option. or who is assigned an option exer- cise, based on the erroneous index level. Similarly, per- sons who are holders or writers of delayed start options on the exercise price setting date bear the risk that an erroneously reported index level will be used to set the exercise price. There is the additional risk that a correct index level will be used, but the options market will calcu- late the exercise price incorrectly. Once a series of delayed start options is opened for trading on the day after the exercise price setting date, even if a corrected index level is later reported, or it it is later discovered that an exercise price was set incorrectly. the exercise price will not be corrected to account for such errors. The following new sections are inserted at the end of Chapter X of the Booklet following the section captioned 144 CONFIDENTIAL - PURSUANT TOEFEESERLYO0,18629 P. 6(e) CONFIDENTIAL SDNY_GM_00244813 EFTA01393177