Symbology Initiative Overview
Many organizations that support trading in listed options were restricted in their ability to identify and process exchange listed option contracts. These organizations typically used a three to five alpha character representation. The first one to three characters identified the option root symbol and the remaining two alpha characters identified the expiration month, call/put indicator and strike price (IBMER = IBM May 2006 90 call).
This method had been used for over 25 years and posed several limitations in today's marketplace. The limitation of three characters to represent the option root created inconsistency with OTC securities and had resulted in the use of illogical identifiers in both the options and underlying securities markets. The month and call/put codes assume expiration occurs in the following sequential month and assumes a single expiration day.
Long-term Equity AnticiPation Securities (LEAPS®) had never been standardized under this methodology. Similarly, the introduction of exchange listed flexible (FLEX) contracts necessitated a different symbology to address these limitations. These limitations had fueled the proliferation of one to three character root symbol designations needed to support the industry and had impacted the securities markets as a whole.
In July of 2005 the OCC Board of Directors asked OCC staff to work with industry representatives in defining a reasonable timeframe to eliminate the use of OPRA codes in the listed options markets. OCC staff was also instructed to ensure that all option strike prices be represented in decimal format at the same time. Once a plan has been developed, the options exchanges and OCC will jointly mandate a timeframe when all market participants must comply.
A committee was formed to develop a plan. Representatives from broker dealers, exchanges, vendors and OCC actively participated. The Symbology Committee was instructed to develop an implementation plan to bring the options industry into compliance and to include a definitive timeframe.
The Committee published a plan in May 2006 and provided a 120 day comment period. Seven comment letters were received and the responses were crafted. The plan was updated based upon the comments received and was approved by the OCC Board of Directors on December 5, 2006.
The end of January 2007 also marked the deadline for commitments by exchange and OCC staff members to provide enhanced record layouts to be used throughout the testing and implementation phases of the project.
In August 2007, OCC and Exchanges also published additional detailed individual implementation plans.
Detailed test scripts for scripted industry testing were approved and published in September 2008. Subsequently, the five month Scripted Industry Testing effort completed successfully in January 2010.
Committee members next turned their attention to the February 12, 2010 implementation date and corresponding consolidation events from March through May 2010, which were all executed with no reported problems.
