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Options 6C Margins
Section 1. General Rule

No Member may effect a transaction or carry an account for a customer, whether a Member or non-Member of the Exchange, without proper and adequate margin in accordance with this section and Regulation T.

[Adopted June 6, 2019 (SR-ISE-2019-17).]

Section 2. Time Margin Must Be Obtained

The amount of margin required by this Options 6C shall be obtained as promptly as possible and in any event within a reasonable time.

[Adopted June 6, 2019 (SR-ISE-2019-17).]

Section 3. Margin Requirements

(a) A Member must elect to be bound by the initial and maintenance margin requirements of either the Chicago Board of Options Exchange or the New York Stock Exchange as the same may be in effect from time to time.

(b) Such election shall be made in writing by a notice filed with the Exchange.

(c) Upon the filing of such election, a Member shall be bound to comply with the margin rules of the Chicago Board of Options Exchange or the New York Stock Exchange, as applicable, as though said rules were part of these Rules.

(d) The margin requirement for any foreign currency put or call option listed and traded on the Exchange and issued by a registered clearing corporation shall be calculated as follows:

(1) The Exchange will review the five day price movements comparing the base currency against the underlying currency over the most recent three-year period for each foreign currency pair underlying options traded on the Exchange and will set margin levels which would have covered the price changes over the review period at least 97.5% of the time ("confidence level").

(2) Subsequent reviews of five day price changes over the most recent three year period will be performed quarterly on the 15th of January, April, July and October of each year.

(3) If the results of subsequent reviews show that the confidence level for any currency pair has fallen below 97%, the Exchange will increase the margin requirement for that currency up to a 98% confidence level. If the results show a confidence level between 97% and 97.5%, the currency pair will be monitored monthly until the confidence level exceeds 97.5% for two consecutive months. If the results of a monthly review show that the confidence level has fallen below 97%, the margin requirement will be increased to a 98% confidence level. If the results of any review show that the confidence level has exceeded 98.5%, the margin level would be reduced to a level which would provide a 98% confidence level.

(4) The Exchange will also review each currency pair for large price movements outside the margin level ("extreme outlier test"). If the results of any review show a price movement, either positive or negative, of greater than two times the current margin level, the margin requirement for that currency pair will be increased to a confidence level of 99%.

(5) The Exchange may also conduct reviews of currency margins levels at any time that market conditions warrant.

[Adopted June 6, 2019 (SR-ISE-2019-17); amended March 18, 2020 (SR-ISE-2020-11), operative April 17, 2020.]

Section 4. Meeting Margin Calls by Liquidation Prohibited

(a) No Member shall permit a customer to make a practice of effecting transactions requiring initial or additional margin or full cash payment and then furnishing such margin or making such full cash payment by liquidation of the same or other commitments.

(b) The provisions of this Rule shall not apply to any account maintained for another broker or dealer in which are carried only the commitments of customers of such other broker or dealer, exclusive of the partners, officers and directors of such other broker or dealer, provided such other broker or dealer is a Member of the Exchange or has agreed in good faith with the Member carrying the account that it will maintain a record equivalent to that referred to in Options 6C, Section 6.

[Adopted June 6, 2019 (SR-ISE-2019-17); amended March 18, 2020 (SR-ISE-2020-11), operative April 17, 2020.]

Section 5. Margin Required Is Minimum

(a) The amount of margin prescribed by these Rules is the minimum which must be required initially and subsequently maintained with respect to each account affected thereby; but nothing in these Rules shall be construed to prevent a Member from requiring margin in an amount greater than that specified.

(b) The Exchange may at any time impose higher margin requirements with respect to such positions when it deems such higher margin requirements to be advisable.

[Adopted June 6, 2019 (SR-ISE-2019-17).]

Section 6. Margin Requirements Exception

(a) No margin is required for a call option written on an equity security when the account holder possesses a "long" position in a vested employee stock option which can be immediately exercised without restriction (not including the payment of money) to purchase an equal or greater quantity of the security underlying the short call provided that:

(1) The vested employee stock option does not expire before the short call;

(2) The amount (if any) by which the exercise price of the vested employee stock option exceeds the exercise price of the short call option is held in or deposited in the account; and

(3) The account holder, broker-dealer and issuer of the vested employee stock option complete such account documentation and comply with such terms and conditions proscribed by the Exchange in such form, format and procedure as may be established by the Exchange from time to time, including without limitation execution of an agreement by account holder, broker-dealer and issuer that requires:

(A) Account holder to pledge the vested employee stock options to broker-dealer (including an agreement that in the event account holder exercises any of the pledged vested employee stock options during the term of a transaction, the account holder will be required to pledge to broker-dealer the shares issued upon exercise to replace the vested employee stock options that were pledged before exercise);

(B) Account holder to provide broker-dealer with an irrevocable power-of-attorney authorizing broker-dealer to exercise the vested employee stock options on the account holder's behalf;

(C) Issuer to promptly deliver the stock upon payment or receipt of the exercise notice from broker-dealer; and

(D) Issuer to waive any transfer restrictions that would preclude a pledge of the vested employee stock options to broker-dealer.

[Adopted June 6, 2019 (SR-ISE-2019-17).]

Section 7. Reserved

Reserved

[Adopted March 18, 2020 (SR-ISE-2020-11), operative April 17, 2020.]

 
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