option that is associated with any given change in the price of the underlying security will lend to be larger for many such debt options. If the unit of trading for a physical delivery pricebased debt option is smaller than 51.000,000, investors who buy or write options covering principal amounts other than a multiple of 51 ,000,000 may be disadvantaged by having to deal in an odd-lot market for the underlying debt security at prices that are less favorable than for round lots. 3. In the event of a shortage of the underlying debt security deliverable on exercise of a physical delivery price-based debt option OCC has the authority to permit other generally comparable securities to be delivered in fulfillment of the delivery obligation. If OCC exercises its authority to allow such other securities to be delivered, it may also adjust the exercise prices of the affected options by setting different prices at which otherwise non-eligible securities may be delivered. As an alternative to permitting such substitute deliveries. OCC may impose special exercise settlement procedures similar to those applicable to stock options, including the fixing of a cash settlement price payable by writers who would otherwise be unable to meet their delivery obligations (see "Settlement" in Chapter VIII). and/or prohibit the exercise of puts by holders who would be unable to meet the resulting settlement obligations (see paragraph 5 under "Risks of Option Holders" above). 4. The hours of trading for debt options may not conform to the hours during which the debt securities are traded. To the extent that the options markets close before the markets for the underlying or other related instruments, significant price and rate movements can take place in the underlying markets that may not be reflected in the options markets. The possibility of such movements should be taken into account in relating closing prices in the options markets to those in the underlying markets. In addition. there is a risk that debt options may be exercised on the basis of price movements in the underlying security after the close of trading in the options markets when writers are no longer able to close out their short positions. 5. Because exercises of yield-based options are settled in cash, option writers cannot fully provide in advance for their potential settlement obligations by acquiring and holding the Treasury security from which the underlying yield is determined. A writer of a yield80 CONFIDENTIAL - PURSUANT TOEFEESEIMCS0&T.841 P. 6(e) CONFIDENTIAL SDNY_GM_00184025 EFTA01353465