Beginning in 2006, working groups comprised of brokers, exchanges, clearing houses and vendors were formed in order to represent each of the U.S. and Canadian securities industries in a multi-year effort to develop a revised data format for representing listed option symbols. These efforts, referred to as the Option Symbology Initiatives (OSIs), are intended to provide the following benefits:

 

-         Decrease the number of errors in the front, middle and back office processes.

-         Represent the vast majority of listed option contracts using the same symbol as the

           underlying security to reduce investor confusion.

-         Reduce corporate action symbol conversions.

-         Eliminate wrap symbols.

-         Eliminate the need for LEAP rollover process.

-         Reduce the frequency of coordination among exchanges for symbol elections.

-         Support the growth in product listings through additional expiration events and more

           flexible strike price designations.

 

The following article provides background information regarding the products impacted by the OSI, the revised data format, project timeline and client impact as well as external links where additional information may be found.

 

The table below lists the product classifications of the US and Canadian exchange listed options which are impacted by the OSIs.  Note that while the mandated conversion date for Canadian options is identical to that of the US (i.e., February 12, 2010), the conversion of Canadian options was accelerated and completed by IB in September 2009.

 

 

Each OSI will replace the 5-character code with a 21-character OSI identifier to be used in the transmission of listed option contracts between exchanges, the clearinghouses and their constituents. The 21-character OSI identifier comprises six data elements arranged in logical order, each with a minimum field size. An example is provided in the table below.  

*If the Option Root Symbol is less than 6 characters, spaces are added to equal the six character minimum.
 

The industry effort has been organized into two phases:

 

1. The Conversion Phase in which the OPRA code format will be dropped and the 21-character record layout employed to include the expiration day and decimal strike price. This phase was completed on February 12, 2010; and

 

2. The Consolidation Phase during which LEAPS, wrap, FLEX, short-dated and non-standard delivery contracts will have their symbols consolidated to that of the underlying (e.g. MSQ to MSFT).  This phase will take place over the 5 weekends starting March 12, 2010 and ending May 14, 2010. Note that there are certain contracts, referred to by OCC Class Consolidation Exceptions, which will not be consolidated.  These contracts include binary and CDO options, options having a 5 character underlying as well as  options having unique settlement terms (e.g., settle on open).  In addition, adjusted symbols which are the result of a prior corporate action will be consolidated to the new OSI corporate action format at the time the underlying class consolidates.

 

Outlined in the table below are the key milestone and effective dates for this consolidation phase and the products impacted.

 

 

During this consolidation phase Good-till-Canceled (GTC) and Good-till-Date (GTD) orders will need to be canceled for all the option classes which are scheduled to consolidate. To accommodate this exchange mandate, IB will cancel all customer GTC and GTD orders on the Sunday of each milestone cycle.  Confirmation of these cancellations (outs) will be provided prior to effective date open (Monday) at which point customers may re-enter these orders utilizing the post consolidation symbol.

 

For additional information, please visit the symbology initiative sections of the OCC and Montreal Exchange websites.