EFTA01393125

instructions for that day. Different firms may have dif- ferent cut-off times for accepting exercise instructions from customers, and those cut-off times may be differ- ent for different options. A brokerage firm's cut-off time for accepting exer- cise instructions becomes critical on the last trading day before an option expires. An option that expires unexercised becomes worthless. An option holder who intends to exercise an option before expiration must give exercise instructions to his brokerage firm before the firm's cut-off time for accepting exercise instructions on the last trading day before expiration. Many brokerage firms accept standing instructions to exercise, or have procedures for the exercise of, every option which is in the money by a specified amount at expiration. These procedures often incorporate by ref- erence OCC's administrative procedures that provide for the exercise of every option that is in the money by a specified amount at expiration unless the Clearing Firm carrying the option in its accounts instructs OCC not to exercise the option. Investors should determine from their brokerage firm the applicable cut-off times, the firm's procedures for submitting exercise instruc- tions, and whether any of their options are subject to automatic exercise. Investors should also determine whether the exercise of their options is subject to standing instructions of their brokerage firm, and, if so, they should discuss with the firm the potential conse- quences of such instructions. In highly unusual circumstances (e.g.. where a bro- kerage firm is unable to receive instructions from its customers), a firm may be authorized under applicable rules to make an exception to its regular cut-oft time. However, in order for an option to be exercised, the brokerage firm must in any event pass on its cus- tomer's exercise instructions to OCC before expiration. OCC may allow exercises for a limited time after expira- tion in the unlikely event that OCC is unable to follow its normal procedures for receiving exercise instructions from Clearing Members on the expiration date. Sub- ject to that very limited exception, OCC has no author- ity to extend the expiration of any option. Once an exercise instruction is given by a Clearing Member to OCC, It cannot ordinarily be revoked ex- cept to correct a bona fide error that is specified in a request filed by the Clearing Member prior to a dead- line specified in OCC's rules. 50 CONFIDENTIAL - PURSUANT TOEFEESERM$066535 P. 6(e) CONFIDENTIAL SDNY_GM_00244719 EFTA01393125