January 8, 2010
Dear Sir / Madam,
I am writing to you to express my full support for CBOE’s rule filing to eliminate the minimum size requirements on Flexible Exchange (FLEX) options.
Our firm works with insurance companies across North America who use dynamic hedging to manage the risk associated with the embedded options in their Variable Annuity and Equity-Indexed Annuity liabilities. We believe that eliminating the minimum size requirements on FLEX options would enable all insurers to more effectively hedge their risks and virtually eliminate counterparty risk exposure associated with OTC trades.
The elimination of the "PM" settlement restriction currently in place on 5 days per month would also allow insurers writing Equity-Indexed Annuities to match their asset hedges to the exact date and reference price of their liabilities.
Charles L. Gilbert
Nexus Risk Management