Self-Regulatory Organizations; Amendments to Accept and Manage Binary Options
AI-generated summary for informational purposes only. Not legal advice. See the original source for the authoritative text.
The Options Clearing Corporation (OCC) plans to accept binary options for clearing, updating its risk management methodology to handle these products. This change makes it possible for member exchanges interested in listing binary options to do so, potentially expanding the market for this type of derivative. The primary impact is on financial institutions and brokers that will need to adapt to the new clearing process for these options.
AI-generated summary. May contain errors. Refer to official sources for legal decisions.
Key Changes
- OCC will accept binary options for clearing.
- Risk management methodology updated for binary options.
- Use of Black-Scholes framework for pricing binary options.
Obligations
What this law requires
The Options Clearing Corporation (OCC) must update its STANS Methodology Description to include provisions for the acceptance and risk management of binary options.
OCC must calculate margin requirements for clearing member accounts holding binary options positions using its revised STANS methodology.
Clearing members seeking to clear binary options through OCC must comply with the updated margin requirements as calculated by the STANS methodology.
OCC must ensure that its pricing for binary options aligns with market conditions through the use of an adjustment term in the pricing model.
OCC must validate its proposed approach for pricing binary options through its Model Risk Management team before implementing it.