Federal regulation requires that option investors receive an options disclosure document before trading an options product. Specifically, Rule 9b-1 under the Securities Exchange Act of 1934, 17 CFR 240.9b-1, requires a broker-dealer to deliver an options disclosure document to a customer before the customer may trade the options that are covered by that document. Options disclosure documents are intended to inform customers about the general characteristics and risks of standardized options.
Characteristics and Associated Risks of Binary Options (the “CARBO”) is the options disclosure document for KPI binary options issued and cleared by CCUS. Broker-dealers should provide the CARBO to each customer that the broker-dealer has verified as authorized to trade KPI binary options. The CARBO applies to KPI binary options only. Although the CARBO includes information about other types of binary options for informational purposes, the CARBO is not the options disclosure document for any other type of binary option or any other type of option. Accordingly, delivering the CARBO to a customer does not satisfy the requirement to provide an options disclosure document for any option other than KPI binary options.
The CARBO can be downloaded here. Broker-dealers should obtain the CARBO only from this page on the CCUS website and should not use copies obtained from any other source.
Each broker-dealer is responsible for delivering the CARBO in accordance with Rule 9b-1 and the rules of its designated options examining authority. Before delivering the CARBO electronically to a customer, the broker-dealer must determine, on a customer-by-customer basis, whether electronic delivery is permissible for that customer under Rule 9b-1 and the applicable rules of its designated options examining authority. If electronic delivery is not permissible for a customer, or if the broker-dealer is otherwise required to provide a physical copy, the broker-dealer must: (1) download the CARBO from the CCUS website using the link above; (2) print the CARBO in its entirety; and (3) confirm that the printed copy is complete and legible and exactly reproduces the version of the CARBO available on the CCUS website, without alteration, omission, or addition. CCUS does not supply printed copies of the CARBO.
