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Pledges to OCC

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A Participant writing an option on any options exchange may fully collateralize that option by pledging the underlying securities by book-entry through DTC to the Options Clearing Corporation (OCC). If the option is called (exercised), the securities may be released and delivered to the holder of the call. If the option contract is not exercised, OCC validates a release of the pledged securities, which are then returned to the Participant's general free account.

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After an option contract has expired, the option writer may rollover or continue to use the original collateral for subsequent contracts. By following an OCC procedure, you may rollover the collateral without preparing a Release of Collateral form and a new Options Depository Receipt form. Contact OCC for information about this procedure.

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OCC automatically releases securities deposited with it to cover margin requirements on an option contract when the option contract expires. The securities are then allocated to your general free account. Notification of the released securities is received via the Collateral Loan Services functionality in the Settlement User Interface or automated output.

Note- OCC will begin releasing expired options at the close of business on the Friday following the expiration weekend. On the following Monday, OCC will release the deposits on expired options to DTC.

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You can deposit securities at DTC between 8:30 a.m. and 1:00 p.m. eastern time for same-day deposit credit. You can then pledge your free position by book-entry to the OCC as follows:

  • Segregate underlying securities supporting put and call options
  • Pledge U. S. government securities to satisfy OCC put and call margin requirements
  • Pledge U. S. government securities to meet clearing fund obligations
  • Pledge U. S. government securities of sufficient value to cover the exercise price of put and call option contracts.
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You can deposit U. S. government securities at DTC to be pledged by book-entry to OCC to meet clearing fund requirements.
The term "U. S. government securities" refers to securities issued or guaranteed by the United States government and having a maturity of 5 years or less from the date of issuance.

  • Short-term government securities: Securities maturing less than one year from the date of deposit.
  • Long-term government securities: Securities maturing one to five years from the date of deposit.

 

U. S. government securities are valued for clearing fund purposes as follows:

  • Short-term government securities: Securities valued at the lesser of par value or 100 percent of their current market value.
  • Long-term government securities: Securities valued at the lesser of par value or 95 percent of their current market value.

OCC determines the current market value of U. S. government securities at any given time on the basis of the quoted ask price supplied by the Federal Reserve Bank of New York (FRBNY) on the last day of the preceding month, or such later date as its Margin Committee designates.