Options Industry Presses for Time as Deadline for New Symbology Draws Closer
New nomenclature not a priority, say financial institutions
February 2, 2009
In the face of mounting pressure from Wall Street, the Options Clearing Corp. (OCC) is holding to its February 2010 deadline for implementation of a new nomenclature for listed options.
In separate letters sent in December to Michael Cahill, president and COO of the U.S. options clearinghouse, TD Ameritrade, Charles Schwab Corp., JP Morgan Chase & Co. and UBS Financial Services all said that while they approve of the move to a new 21-character symbology key, they are concerned about the timetable. OCC has spearheaded the switch--known as the Options Symbology Initiative (OSI)--since 2005 through a committee of industry representatives.
Meeting the target date "would place significant demands on our technical and operations resources which we don't believe is in the best interest of our shareholders in the challenging market environment," wrote Peter Cherasia, managing director and global head of technology at JP Morgan, in a letter obtained by Securities Industry News. "The OCC project will consume extensive operations, programming and infrastructure resources. We believe the wisest course is to delay the implementation to allow firms to address their business priorities and still make progress on the OSI."
Jeffrey Brown, SVP of legislative and regulatory affairs for Charles Schwab, requested a delay of at least nine months to allow firms to "focus on more urgent matters." UBS asked for a postponement of 12 months or more, noting that several other large firms share its view.
Although TD Ameritrade COO David Kelley did not explicitly call for a delay, he criticized the initiative for failing to provide a uniform standard for options quotations. "The average investor will be faced with confusing nomenclature when seeking quotations on options securities," said Kelley in a Dec. 11 letter. He cited the example of investors seeking quotations on a Nasdaq 100 Index Dec. 30 call option: On Google, they would enter QQQQLD and on Yahoo QQQQDec30call. To receive a phone quotation from a broker such as Ameritrade, investors would use 777708332302255, but to pull a quote from an Ameritrade account the nomenclature would be QQQQ081219C30.
Kelley disputed OCC's contention that the lack of a standard will create a competitive advantage for firms, calling the reasoning "questionable." He wrote, "Quotations in virtually all other markets are uniform and standard. Imagine if a client wishing to pull a quotation on an underlying equity security faced the same standard." Confusion on the part of retail investors could harm the option industry's growth, added Kelley, urging that OCC considers creating a "unified and coordinated approach to address the issues with the proposed symbology plan."
While firms need to accept options data in the new format by the end of June, the OSI committee--comprised of representatives from brokers, exchanges and vendors--voted in March 2008 to extend by six months the original July 31, 2009 deadline for sending it. Initially planned to end in October, the transition of symbols from five to 21 characters is currently expected to be done in May 2010. As a result, OCC has postponed industrywide testing, originally slated to begin in March, to October 2010.
No Second Delay
OCC does not want the initiative pushed back further. In a Dec. 10 letter to Thomas Jordan, chairman of the advisory committee of the Financial Information Forum (FIF), a technology trade group, Cahill said that OCC's board had on Dec. 2 unanimously endorsed the deadline. New York-based FIF, whose membership is comprised of IT and data management experts at some of Wall Street's largest firms, has also expressed concerns about the time frame.
