• Report: #1121397

Complaint Review: Options Clearing Corporation

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  • Submitted: Thu, February 06, 2014
  • Updated: Wed, February 12, 2014

  • Reported By: theOptionsGuy — Covington Georgia
Options Clearing Corporation
One North Wacker Drive, Suite 500 Chicago, Illinois USA

Options Clearing Corporation OCC, theOCC Options Clearing Corporation stands by rules that defrauds customers, investors to lose millions Chicago Illinois

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I am writing this email to you in an attempt to shed light on a terrible situation in hopes that media attention may force big business to do the right thing.  In short, the Options Clearing Corporation (OCC) has an outdated policy in its bylaws that allows the OCC to materially alter options if the stock reverse stock splits too many times.  I have hundreds of thousands of dollars invested in these options; an investment that was reduced 75% by these rules.  I assumed that in the financial world, soundness and safety of investments would prevail and simply bringing the error to their attention would warrant an immediate resolution.  I was shocked as my concerns were met with 'rules are rules'.  The rules are so poorly written that the rules, as written, will wipe out an entire option series and all investors will lose money as the entire options series will become worthless.  Millions of dollars are at stake.  Customers have no idea that their investments could disappear. When I asked the OCC about it, they responded that they can't speak about the future and that I would have to wait and see.  I asked why would an choice to wipe out investors even be on the table for consideration.  This entire situation is nonsensical.  The OCC is aware of the error, knows the impacts, and is willing to continue to defraud customers.  I am shocked, appalled, and disgusted.

I reached out to the Securities Exchange Commission and its lawyer said that OCC makes its own rules.  In America?  Rules that defraud customers sound illegal.  I have email dialogue from the  Senior Vice President & Deputy General Counsel of the OCC, and I want to warn as many people as possible because the altered options series is still trading and the public has no idea that under current OCC rules the series could become worthless in July 2014, 6 months before expiration.

The methodolgy for handling reverse stock splits has a bug/flaw.  The rule is dated and no longer fair or impartial.  Rather than adjusting that rule.  The OCC has opted for business as usual.  Immaterial changes in the stock market should result in immaterial changes in the options market.  Stock splits are unnaffected by this policy as the rules governing stock splits are equitable.  Any long term puts (LEAPS) that held in stocks that continually reverse stock split are subject to being wiped out under the current OCC bylaws.

The rules affecting reverse options for equities that reverse stock split can be found under Article VI, Section 11A (d) of the OCC bylaws.  Memo #33967 is the memo that the OCC released that devalued my holdings.  My UVXY1 options were trading for $0.40 three weeks and yesterday traded for $0.01.  The memo wiped a fractional share and added a cash payment to my $1 Puts.  Having a previous max value of $100, the memo has altered the structure of the options I have been holding for 12 months.  The new structure has a max value of $68.  The market responded by immediately devaluing the options.  I immediately began receiving margin calls associated with the change.  I even offered the OCC a different approach that does not matterial alter my options.  I was hung up on by a rep in the 1.888.OPTIONS and essentially ignored by investorservices@theocc.com.  After copying the news, I finally got a response from their general counsel.  The thought that immaterial changes in the stock market would result in material changes the options market is ludacris.  Buyer Beware! The OCC is sticking to its guns and you will lose your money by investing in long term options are the OCC will wipe you out and refer you to their bylaws.


This report was posted on Ripoff Report on 02/06/2014 08:43 AM and is a permanent record located here: http://www.ripoffreport.com/r/Options-Clearing-Corporation/Chicago-Illinois-60606/Options-Clearing-Corporation-OCC-theOCC-Options-Clearing-Corporation-stands-by-rules-that-1121397. The posting time indicated is Arizona local time. Arizona does not observe daylight savings so the post time may be Mountain or Pacific depending on the time of year.

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