In order to accomodate the shift in thesettlement procedure for options on the Standard and Poor's 500
stock index that the exchange announced last month, the Chicago
Board Options Exchange (CBOE) said it has created a new class
of options for the S and P contract &lt;SPX>.
    The CBOE's new contract was needed to coincide with changes
in the settlement procedure that the Chicago Mercantile
Exchange (CME) made on its S and P 500 futures and options
contract which will be implemented with the expiration of the
June contract.
    Settlement of the CBOE's new option contract will be based
on the opening price of the S and P 500 index on expiraton day,
while settlement of the current contract is based on the
closing price of the index.
    "CBOE doesn't think that opening settlement is the solution
to the expiration effect, but we cannot exposure investors in
our market to unanticipated risks arising from different
settlement times in options and futures," CBOE chairman Alger
Chapman said in a release.
    "We're taking this step to give investors a choice of
settlement times that meet their hedging needs," Chapman said.
    The new contract was necessary because the Options Clearing
Corp (OCC) did not allow its member exchanges to modify terms
of any of its outstanding contracts, the CBOE said.
    The new contract will satisfy the needs of customers who
require an options contract based on opening prices of the
index, the CBOE said.
    The opening settlement contract will trade parallel to the
closing settlement contract as long as the CME maintains its
opening settlement procedure for the S and P 500 futures
contract, a CBOE spokesperson said.
    However, she noted that customer preference for one type of
settlement procedure will eventually determine which contract
will prevail.
    The opening settlement contract will trade on a March,
June, September, December quarterly expiration cycle and will
be listed as soon as the OCC revises its contract prospectus,
possible in April, the exchange said.
 Reuter
