Subject: File No. SR-OCC-2006-01
From: Mike Ianni

April 5, 2006

Response to the Option Committee of the SIA

You state that this new rule change will create "greater transparancy". How exactly does more uncertainty create more transparancy? Please read my letter and Erik Hatog's letter.

You also suggest that the OCC should adjust because they adjust "globally" - ie Eurex. This makes no sense - just because Eurex does it - so should we. BTW - Montreal doesn't adjust every little special dividend. I'd like to point out that when there is this uncertainty (whether a dividend is ordinary or special) in the Eurex marketplace - there often is NO bid or ask for the underlying options - NONE - no market makers - is this something you want?

It would be interesting to find out "who" - who exactly proposed this rule? which leads me to speculate that it was probably a firm that is a market marker. Market makers tend to be sellers of leaps (calls and puts) - but if they are short puts and short stock - all these special dividends that were paid in the last 12 months that were less than 10% are hurting them because they failed to price in the potential risk of selling long dated put options (risk of increased dividends). So, is the OCC saying that because their buddies (broker dealers) are getting hurt by all these dividends that they should simply change the rules before the next batch of dividends take place (end of 2006)???

What about all those traders that correctly predicted increased dividends and bought leaps (puts)? Should we simply change the rules and transfer the money back to market makers?

What about dividend decreases? ie if GM reduces the dividend to zero - should we adjust it to reflect constant dividends? ridiculous right?? Dividends are part of the risk in pricing options - you have to price predictions in - simply adjusting for all unpredicted changes does not make sense especially the change proposed by the OCC (a mere .125 dividend).