EFTA Document EFTA01393140

be based on a corrected value. Ordinarily, however. the value as initially reported by the official source will be conclusive for exercise settlement purposes. 7. A holder of a yield-based option who exercises it before the exercise settlement value of the underlying yield is available runs the risk that the level of the underlying yield may subsequently change. If such a change causes the exercised option to tall out of the money, the exercising holder will be required to pay the difference between the exercise settlement value and the exercise price of the option (times the applica- ble multiplier) to the assigned writer. A holder who plans to exercise an option may be able to minimize this risk by withholding exercise instructions until just before the exercise cut-off time fixed by his brokerage firm. However. he may not be able to eliminate the risk entirely. Exercise cut-off times for yield-based options may occur before definitive exercise settlement values are announced. Because exercise cut-off times may vary from brokerage firm to brokerage firm, and there may be different exercise cut-off times for different yield-based options, option holders who anticipate ex- ercising should determine the applicable cut-off times from their brokers. 8. If for any reason there are no quotations available for the Treasury security from which underlying yields of a yield-based option are determined, trading in the option may be halted. If trading is not halted, reported yields may be based on non-current price information for the Treasury security. 9. If OCC determines that the exercise settlement value of the underlying yield for any series of yield- based options is unreported or otherwise unavailable for purposes of calculating the cash-settlement amount of such series, OCC has the authority to sus- pend the settlement obligations of the exercising and assigned Clearing Members of options of such series or to fix the cash settlement amount for exercised op- tions of such series based on the best information available to OCC, or to do both. Accordingly, there is a risk to both holders and writers of such options that the settlement of exercised options may be postponed and may be based on a determination by OCC rather than by the pricing actions of the market for the Trea- sury security from which the underlying yield is determined. 82 CONFIDENTIAL - PURSUANT TODIEBERLY4066567 P. 6(e) CONFIDENTIAL SDNY_GM_00244751 EFTA01393140