Illinois Administrative Code › Title 38 - FINANCIAL INSTITUTIONS › Part 1075 - SAVINGS BANK ACT › Subpart E - INVESTMENTS › Section 1075.570 - Financial Options

Current through Register Vol. 48, No. 28, July 12, 2024
a) Definitions
				as used in this Section apply unless the context otherwise requires.
1) "Call" means an option which gives the
				holder the right to purchase a financial instrument at a price and on or before
				the expiration date specified in the option contract.
2) "Deliverable Instrument" means a financial
				instrument whose terms satisfy the requirements for fulfilling delivery
				obligations of an option.
3)
				"Effective Exercise Price" means the yield equivalent price of an instrument
				whose coupon rate differs from the standard instrument specified in the
				option,
4) "Financial Options
				Contract" means an agreement (other than an optional delivery forward
				commitment contract to purchase and sell mortgages or mortgage-backed
				securities when used as part of the mortgage loan origination process) to make
				or take delivery of a financial instrument upon demand by the holder of the
				contract at any time before the expiration date specified in the agreement,
				under terms established either by:
A) a board
				of trade designated as a contract market for the trading of option contracts by
				the CFTC or a national securities exchange registered with the Securities
				Exchange Commission (SEC); or
B)
				the savings bank and a "permissible counterparty," as defined in subsection
				(a)(10), that are counterparties in an over-the-counter option transaction
				(other than an over-the-counter commodity optional transaction subject to the
				jurisdiction of the CFTC that is not otherwise authorized under the Commodity
				Exchange Act (
				7 USC
				1 ) and the regulations under that
				Act).
5) "Financial
				Options Transaction" means the purchase or sale of a financial options
				contract.
6) "Immediate Exercise
				Value" means the market value gained by exercising an option with the lowest
				cost deliverable instrument at its effective exercise price compared to
				purchasing (or selling) an identical instrument with the same coupon rate in
				the cash market.
7) "Long Position"
				means the holding of a financial options contract with the option to make or
				take delivery of a financial instrument.
8) "Option Commitment Fee" means the option
				premium minus the immediate exercise value of the option.
9) "Option Premium" means the price paid or
				received for establishing an option position.
10) "Permissible Counterparty" means any
				entity that is:
A) a primary dealer as
				defined in subsection (a)(11) of this Section;
B) a bank subject to the regulation and
				supervision of the Comptroller of the Currency, the Federal Deposit Insurance
				Corporation, or the Board of Governors of the Federal Reserve System and that
				is in compliance with applicable regulatory capital requirements;
C) a savings bank that is subject to the
				regulation and supervision of the Division and is in compliance with applicable
				regulatory capital requirements or subject to the regulation and supervision of
				the Division;
D) a broker or dealer
				registered with the Securities and Exchange Commission (SEC) and subject to
				regulation and supervision by a Registered Securities Association (registered
				pursuant to section 15A of the Securities and Exchange Act of 1934 ( 15 USC
				78(o) ) (Exchange Act) or a National Securities Exchange (registered pursuant
				to sections 6 and 19(a) of the Exchange Act) and that is in compliance with
				applicable capital requirements;
E)
				a government securities broker or dealer registered with the SEC that is
				subject to examination and supervision by a Registered Securities Association
				(registered pursuant to section 15A of the Exchange Act) or National Securities
				Exchange (registered pursuant to sections 6 and 19(a) of the Exchange Act) and
				that is in compliance with applicable capital requirements;
F) a futures commission merchant registered
				with the CFTC and that is in compliance with applicable capital
				requirements;
G) the Federal Home
				Loan Banks;
H) the Federal Home
				Loan Mortgage Corporation, the Federal National Mortgage Association, or the
				Government National Mortgage Association or the Government National Mortgage
				Association; or
I) any other entity
				that the Director , upon application, determines to be adequately regulated,
				capitalized, and audited or examined such that acting as a counterparty in an
				over-the-counter options transaction with a savings bank would not entail
				substantial credit risks for the savings bank.
11) "Primary Dealer in Government Securities"
				means any member of the Association of Primary Dealers in United States
				Government Securities and any parent, subsidiary, or affiliated entity of such
				primary dealer: provided, that the member guarantees (to the satisfaction of
				the Division) the over-the-counter financial options transactions between its
				parent, subsidiary, or affiliated entity with a savings bank, and provided
				further that the parent, subsidiary, or affiliated entity is substantially
				engaged in similar activities.
12)
				"Put" means an option that gives the holder the right to sell a financial
				instrument at a price on or before the expiration date specified in the
				financial options contract.
13)
				"Short Position" means a commitment through a financial options contract to
				stand ready during the term of the contract to make or take delivery of a
				financial instrument.