The Option Symbology Initiative - Will you be ready?
By: John Avery, SunGard Consulting Services
The Options Symbology Initiative (OSI) is an industry-wide effort being led by the Options Clearing Corp (OCC) to convert all current US Listed Equity Option "symbols" from a five character representation to a twenty-one character "symbol key". The primary market benefit of this effort will be to support the trading of additional equity option instruments with daily expiry dates and decimal strike prices, as well as, explicit and visible linkage to the underlying cash equity symbol directly in the option symbol. Operations groups that have had to deal with years of challenges in equity options symbology will also benefit from OSI.
The timelines for OSI are aggressive; while individual exchange-based certification and testing is already in progress, industry-wide testing between market participants, the OCC and the exchanges is slated to begin in September 2009. Industry migration to OSI will begin with live trades starting in February 2010 and continue on to May 2010 when all instruments will be OSI compliant.
OSI impacts the technology and operations of all market participants, The major business risk of not complying with OSI is the inability to continue trading equity options because of technology or operational OSI remediation work that is incomplete or incorrect. Most broker-dealers have been planning for OSI for over the past year, particularly with the numerous and complex processes, systems and databases throughout the equity options trade lifecycle they must remediate to comply with OSI. For other firms trading options, their impacts may not be as complex as broker-dealers, but they may therefore be more dependent on third-party vendors, each of whom has their own OSI remediation timelines and testing requirements.
OSI also broadly impacts SunGard across the entire equity option trade lifecycle, including market data, trading, risk management, clearing and settlement. SunGard has been proactively engaged with its customers to help them work through the upcoming OSI changes.
What do you need to be prepared for OSI?
OSI readiness, for all firms big and small and whether you will participate in the industry-wide testing starting in September or not, typically follows a well-defined process that includes:
- OSI Impact Analysis
- OSI Remediation
- OSI Test Planning
- OSI Test Execution
- Deployment and Migration of "OSI-Ready" Systems
Most firms are now well into the OSI Test Planning phase and are dealing with a number of constraints and challenges including:
- The quickly approaching testing and trading guidelines
- Coordination and testing that is much more complex than originally anticipated and budgeted
- Dependence on third-party vendor timelines that adds additional complexity and a lack of internal control over readiness
How can SunGard help you?
SunGard is actively engaged in helping its customers plan, remediate and test their OSI-impacted systems, including non-SunGard systems. SunGard provides the following OSI services by leveraging its internal OSI subject matter expertise across the trade lifecycle, as well as its experience and best practices in helping others. Services include:
- OSI Program & Project Management
- OSI Test Planning & Execution
- OSI Remediation Assistance
Contact SunGard at trading-info@sungard.com to learn more.