Industry Gears Up to Roll Out New Options Symbology

by Crystal Bueno

The February 12 mandatory deadline is fast approaching for the industry-wide initiative that will streamline and clarify how options are represented and reported in the financial marketplace. The Options Symbology Initiative (OSI), being spearheaded by the Options Clearing Corporation (OCC), will replace the confusing and antiquated method of identifying options contracts with a new symbology key.

The OSI covers equity options, index options, yield-based options, short-date options and flex options.

“We have been working closely with customers and industry participants for the past three years to ensure a seamless transition to the new formats,” said Susan Cosgrove, DTCC managing director, Clearance and Settlement/Equities, who noted that DTCC has completed a series of system and product enhancements to accommodate this initiative. “We are urging customers to actively test the final round of enhancements to DTC and NSCC services that process transactions related to option contracts.”

The services impacted by the initiative include the Automated Customer Account Transfer Service (ACATS), the Cost-Basis Reporting Service (CBRS), Collateral Loans (OCC Pledges and Releases) and Premium Payment Orders (PPOs).

Making modifications

To support a smooth transition for OSI modifications, The Depository Trust Company (DTC) and National Securities Clearing Corporation (NSCC) have been working to ensure the relevant systems and products will be fully compliant and thoroughly tested.

For pledges and release requests, DTC completed most OSI modifications in October 2008. PPO changes for manual users were implemented in October 2009. Automated PPO users are encouraged to utilize DTC’s User System (U Region), which will continue to be available through the implementation date to test the new formats.

For both ACATS and CBRS, NSCC’s Participant Services Environment (PSE) has been available for customers to test the programming changes since August 2009. In addition, the OCC supported end-to-end testing of ACATS option asset transfers in PSE from November 30 through December 11. DTCC will keep NSCC’s PSE region open and available for further ACATS option testing and CBRS testing until the new formats are rolled out in production. Changes for both ACATS and CBRS will be implemented in production on February 8, 2010, four days ahead of the industry-wide mandate.

Louis Lepore, DTCC product manager, Clearance and Settlement/Equities, noted that all current users of the CBRS are affected by this initiative, regardless of whether a firm processes option assets through ACATS. “This required change is due to a shift of field positions in the record layouts to accommodate the new and expanded fields to represent options,” said Lepore. “We recommend that customers test internally, or locate other test partners to prepare for the switch-over to the new formats.”

Status of PPOs

DTC used the OSI initiative as an opportunity to transition all PPO processing for manual users to the Participant Browser Service (PBS) from the Participant Terminal Service (PTS). Last October, DTC converted 81 participants to PBS for manual inputs of PPOs and PPO reclaims, effectively eliminating any PPO transactions from being processed through PTS.

“We sunset PTS functionality and the migration was smooth,” said John Manuel, DTCC product manager, Clearance and Settlement/Equities. “All participants met the deadline and continued manual processing of PPOs without incident.”