ED Magedson – Founder
Options Clearing CorporationOne 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
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 firstname.lastname@example.org. 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/reports/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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