Current through Reg. 49, No. 38; September 20, 2024
(a) The
broker-dealer guaranteeing the performance of the terms of the option must, on
the date of the transaction, either be a member of the New York Stock Exchange
or have stockholders' equity or partners' capital, according to generally
accepted accounting principles, in excess of $1 million.
(b) A broker-dealer shall not:
(1) write call options for its account to its
customers unless performance of the call option is guaranteed by the ownership
by such broker-dealer of shares of the underlying security free of encumbrances
sufficient to fully perform the terms of the option; or
(2) write put options for its account to its
customers unless performance of the put option is guaranteed by sufficient
unencumbered liquid net assets of the broker-dealer to fully perform the terms
of the option.
(c) The
guarantee must be full and unconditional and must be maintained throughout the
term of the option.
(d) In lieu of
the three requirements in subsections (a) - (c) of this section, the section
4005.023(b)(1) and (b)(2) guarantee requirements will be satisfied if the
option is issued by a clearing corporation recognized by the State Securities
Board as satisfying all the following standards.
(1) Performance of the option issued by the
clearing corporation is guaranteed by the clearing corporation and by
broker-dealers which are members of the issuing clearing corporation.
(2) Every broker-dealer which is a member of
the clearing corporation must be registered under the Federal Securities
Exchange Act of 1934, as amended.
(3) The clearing corporation must be
registered as a national clearing agency under the Securities Exchange Act of
1934, as amended, and must file with the Commissioner a copy of the prospectus
respecting such option currently being delivered pursuant to the requirements
of the Securities Act of 1933, as amended, and further must agree to promptly
file with the Commissioner a copy of any amendments of such
prospectus.
(4) The option must
either be "covered" and the underlying security on deposit with the clearing
corporation or the clearing corporation must maintain adequate reserve funds
and guarantee system to reasonably assure performance of the option.
(5) Any other conditions the State Securities
Board deems necessary to adequately protect the investing public.
(e) Application for recognition by
the State Securities Board may be made by any organized options clearing
corporation. Clearing corporations recognized by the State Securities Board
are: Options Clearing Corporation; Chicago, Illinois.
