EFTA01393158.pdf

will fix a new settlement date after OCC determines that the exercise settlement value is available or after OCC fixes the cash settlement amount. If OCC determines to fix the cash settlement amount, it will act through an adjustment panel that will use its judgment as to what is appropriate for the protec- tion of Investors and the public interest. For a description of adjustment panels, see "Adjustment and Adjustment Panels" in Chapter II. The panel may fix the cash settle- ment amount using the reported value of the underlying yield Q) at the close of regular trading hours (as deter- mined by OCC) on the last preceding trading day for which such a value was reported by the reporting author- ity or (ii) at the opening of regular trading hours (as deter- mined by OCC) on the next trading day for which such a value was reported by the reporting authority. Alterna- tively, the panel may fix the cash settlement amount using the value for the underlying yield, or using a combi- nation or average of such values. at or during such time or times that the panel sees fit. If an adjustment panel delays fixing a cash settle- ment amount for a series of yield-based options past the last trading day before expiration of that series, normal expiration exercise procedures will not apply to the affected series. Instead, exercise settlement will be post- poned until the next business day following the day when the adjustment panel fixes the cash settlement amount. and each long position in the affected series will be treated as having been exercised if the cash settlement amount per contract for that series is $1.00 or more. If the cash settlement amount per contract is less than $1.00. the option will be treated as having expired unexercised. As a result of these procedures, holders of expiring yield- based options may not know whether their options have been exercised, and writers of such options may not know whether they have been assigned an exercise notice, until after the expiration date. An adjustment panel's determinations shall be conclusive. binding on all investors, and not subject to review. Part VII. Erroneously Reported Index Levels. The paragraph numbered 5. on page 76 is replaced with the following paragraph, which omits a statement that a person who buys or sells an index option at a premium based on an erroneously reported index levelis bound by the trade and has no remedy. The omission reflects the adoption of rules by certain options markets that permit, in very limited circumstances, the cancella- tion or adjustment of a transaction entered into at a pre- mium based on an erroneously reported value for the underlying Interest: 5. Holders and writers of index options generally bear the risk that the reported current index level may be in error. Persons who exercise cash-settled index options or are assigned exercises based on erroneously reported index levels will ordinarily be required to make settlement based on the exercise settlement value as initially 112 CONFIDENTIAL - PURSUANT TOCRESCRPGIMS8597 P. 6(e) CONFIDENTIAL SDNY_GM_00244781 EFTA01393158