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are opened for trading on the business day following the September auction of 5-year notes. Trading in the options will be based upon current yields for the Sep- tember issue until the October auction of 5-year notes. Beginning on the trading day following the October auction, trading will be based upon current yields for the new 5-year notes. The same process will occur in November. If the options expire on or after the auction date for 5-year notes in December, their exercise settle- ment value will be based upon the then current yield for the December issue. Current bid and asked quotations for recently issued Treasury securities of particular maturities are available from normal market sources. Current yield Indicator values based upon a sampling of bid and asked quota- tions from primary dealers are disseminated at fre- quent intervals during the trading day by an options reporting source. Exercise settlement values for yield- based options whose underlying yields are derived from Treasury securities are based upon the spot yield for the security at a designated time on the last trading day of the option, as announced by the Federal Re- serve Bank of New York. The aggregate cash settlement amount that the as- signed writer of a yield-based option is obligated to pay the exercising option holder is the difference be- tween the exercise price of the option and the exercise settlement value of the underlying yield on the last trading day before expiration, as reported by a desig- nated reporting authority, multiplied by the multiplier for the option. Different yield-based options may have different multipliers. The exercise prices of yield-based options are ex- pressed in terms of the yield indicator. For example, an exercise price of 82.50 would represent a yield of 8.25%. Each point of premium will correspond to .1% in yield. The dollar value of the premium for a single yield-based option will equal the quoted premium mul- tiplied by the dollar value of the option multiplier. Thus, a premium of 21/2 would equal a premium of $250 for an option having a multiplier of 100, or $5000 for an option having a multiplier of 2000. The premiums of yield-based options are affected by the factors discussed under "Premium" in Chapter II. 33 CONFIDENTIAL - PURSUANT TaffiEBERMIMS6518 P. 6(e) CONFIDENTIAL SDNY_GM_00244702 EFTA01393115