EFTA01353470.pdf

the currency underlying the option, there is no assur- ance that if he is assigned an exercise he will be able to sell such currency at the exercise settlement value. 11. If a cash-settled foreign currency option is exer- cised based upon a reported exercise settlement value that is in error, the holder and the writer will ordinarily be obligated to make settlement based on the exercise settlement value as originally reported. even If the value is subsequently revised or determined to have been inaccurate. In extraordinary circumstances (e.g., where the value as initially reported is obviously wrong and inconsistent with other available price information and a corrected value is promptly announced). OCC has discretion to direct that the exercise settlement be based on the corrected value. 12. If cash-settled foreign currency options expire on a trading day—as is the case with the cash-settled options traded at the date of this booklet--there will ordinarily be an abbreviated trading session in those options on the morning of their expiration date. If the opening of the options market should be delayed for any reason on that day, there may be no trading at all that day in those options. Accordingly, holders and writers who wait until the last trading day to close out their positions in closing transactions in those options run a risk that they may be unable to do so. 13. If OCC determines that the exercise settlement value for any cash-settled foreign currency option is unavailable for purposes of calculating the cash settle- ment amount. OCC has the authority to suspend the settlement obligations of the exercising holder and as- signed writer of such option or to fix the cash settle- ment amount based on the best information available to OCC, or to do both. Accordingly. there is a risk to both holders and writers that the settlement of exer- cised cash-settled foreign currency options may be postponed and may be based on a determination by OCC rather than by the procedures specified by the options market on which the options are traded. SPECIAL RISKS OF FLEXIBLY STRUCTURED OPTIONS In addition to tho risks discussed above, the follow- ing special risks are applicable to flexibly structured options. 1. Because flexibly structured options have variable terms that are fixed by the parties, there are no pre- 87 CONFIDENTIAL - PURSUANT TOEFEESERMIRMY.848 P. 6(e) CONFIDENTIAL SDNY_GM_00184032 EFTA01353470