The Chicago Board Options Exchange, Inc. (CBOE) is seeking comments on its proposed rule change to amend its margin requirements in an effort to facilitate the ability of account holders to use vested and currently exercisable compensatory employee stock options (Vested Employee Options) issued by publicly traded companies as collateral for writing call options that have the same underlying security as the Vested Employee Option. Specifically, the proposal would allow account holders to sell listed equity call options on the same security that underlies their Vested Employee Options without posting margin. Given the uncertificated nature of employee stock options, the proposal contains certain requirements in order to secure the account holder’s obligations in such transactions. An amendment to the original proposed rule change provides that publicly traded companies issuing Vested Employee Options will maintain that such options are covered by an effective registration statement on Form S-8 and will notify the broker-dealer immediately if the registration statement becomes ineffective.
The proposed rule change is available here.