FINRA Updates Five Broker Rules for Company KPI Options

FINRA amended five rules on Oct. 22, clarifying how broker-dealer options requirements apply to binary contracts tied to company metrics and options cleared by agencies other than the Options Clearing Corporation (OCC). The changes define how existing options standards apply as exchanges pursue products linked to public-company figures. The amendments took effect immediately when filed. They revise Rules 2220, 2351, 2357, 2360 and 4210, covering customer communications, approval to trade, supervision, position reporting and margin. FINRA also addressed margin treatment for spreads and straddles. A company KPI option pays based on whether a specified financial or operating metric meets a condition set in the contract. That differs from an option tied directly to a company’s share price.

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