Is it not possible to enable margin on your existing cash account rather than open a new margin account and transfer the position over?
I hate to be negative but I disagree with your statement that this proves that IBKR is unable to deliver shares - they are able to deliver shares but your (cash) account does not currently allow a short position, I don’t think that is IBKRs fault and I don’t think this would lead to the cash settlement option mentioned in the OCC memo.
Reply I just got from WeBull:
There is a way to send an email that chat doesn’t tell you about. Thots posted the link above.
I sent emails with attachment to both Trading and Account Services at Fidlity along with the OCC memos attached.
Shout out to Thots for providing the link.
My account is a TFSA (registered tax free account for Canadians). So no, there is no way to upgrade my account to a margin one
Just adding my call with Schwab.
They didn’t even bother bringing up being able to get shares- just flat out said they won’t be able to find them. They told me that they have to wait to hear back from The OCC on how the cash settlement would work because in his words “I don’t even know how the Cash Settlement would work”.
So he told me to check back in later today or tomorrow. Naturally I told him there is not much time but it seemed like they really have no idea what to do or how to do it.
Which is of course encouraging /s
I feel like the wording “We are unable to participate in broker to broker settlement because we are unable to get the shares” is what this memo was supposed to be addressing. How can they just say “Rules don’t apply to us”, c’mon…
TD:
09:37 Anonymous so far: I have a question about RSX puts that are in my account.
09:38 Sonja_T: Sure! How can I help with those?
09:40 Anonymous so far: The OCC put out a new memo regarding settlement of options and it appears they are allowing cash settlement of the options now since the underlying is halted. Can confirm the price they will cash settle at?
09:43 Sonja_T: okay one moment please while I take a look into that!
10:03 Sonja_T: Thank you for waiting there, I am still trying to get some more information on this memo and how it affects contract holders.
10:15 Sonja_T: Thank you again for waiting. This reads to me that they still are taking requests but they are going with broker to broker settlement instead of settlement through the NSCC. Broker to broker settlement is riskier and not guaranteed for timely delivery or delivery at all and it up to the delivering and receiving parties to talk to the OCC if settlement cannot be completed.
At this time, Td Ameritrade is not taking those requests for exercising the RSX contracts. It says that in this case, they may subsequently occasion cash settlement as determined by OCC. The OCC though has not given what that cash settlement price would be if they were to go this route, we would have to wait for another memo to be produced with that information.
My Reply to them -
Robert,
While I understand these memos can be confusing, I do think the language is pretty clear. Am I able to open a short position? If I am not able to do, or RobinHood is not able to provide this service does the memo not specify a remedy in these events.
But the memo does clearly say, If it is not possible for the delivering Clearing Member to effect delivery of the RSX shares on the designated settlement date, then the settlement obligations of both delivering and receiving Members shall be delayed until such time as OCC designates a new exercise settlement date, settlement method and/or settlement value. This determination allows delivering Members the opportunity to effect settlement if they have RSX shares and are able to effect delivery, but delays the settlement obligation when this is not possible.
I do not understand why it is RobinHood’s position these should expire worthless and that I have no other options.
It sounds like it’s not a rule. It’s an exception made by OCC to provide resolution which the brokers have to actively apply for.
Yet another RH response:
Basically anyone on RH is boned (because they restrict opening any short positions) unless OCC releases another memo saying the deliverable is cash rather than shares.
Well, this is the case b/c OCC hasn’t sent out any information on how the cash settlement would work.
The thing is, our brokerages have to say they can’t reasonably exercise and they need to send it in writing to the OCC so that instructions can be presented.
Instead of stating they can’t reasonably exercise to the OCC, they instead said “Please, go ahead and exercise but it’s a 500% margin requirement”
Doesn’t this clearly state if the delivering party (Put Holder) cannot deliver then the settlement obligations are delayed for both parties? The delivering parties obligation is delayed if it cannot be met.
“The deliverable for RSX options contracts will remain 100 RSX Shares. If it is not possible for the delivering Clearing Member to effect delivery of the RSX shares on the designated settlement date, then the settlement obligations of both delivering and receiving Members shall be delayed until such time as OCC designates a new exercise settlement date, settlement method and/or settlement value. This determination allows delivering Members the opportunity to effect settlement if they have RSX shares and are able to effect delivery, but delays the settlement obligation when this is not possible. Both the delivering and receiving Clearing Members are required to immediately notify OCC if they are unable to effect settlement.”
Seems like Robinhood can’t choose to not do anything - they have to notify the OCC and it gets delayed until they provide further guidance.
For folks struggling with RH, and are open to initiating short positions, I wonder if there is leverage in this section of the memo:
There are different ways to “effect delivery.” RH is relying on us to have already had the shares. But that is not the only way. They could lend out the shares. If they are also unable to lend out the shares too, only then does failure to deliver occurs.
To be clear, the onus is not solely on you and I to have had the shares handy.
If this is the case, then they must delay settlement, as per the same OCC memo.
In many ways, delayed settlement is great - don’t need to be short, don’t need to lock up margin, and don’t need to pay borrow fees.
Seems to be a difference between “not possible” and choosing not to.
RH didn’t try and fail to effect delivery, they are simply telling customers to FO
In any case, its clear that the broker has to support you here - if they just do nothing then the options expire worthless. They have to be willing to contact the OCC and say that they were not able to settle : “Both the delivering and receiving Clearing Members are required to immediately notify OCC if they are unable to effect settlement.”
just sent this to robinhood and will share their response
"I would like to request cash settlement for my RSX position considering the new information brought forward in https://infomemo.theocc.com/infomemos?number=50188. After speaking with OCC, they have indicated that the memo means that long put holders who find themselves unable to go short can have their broker reach out to have the options settled in cash.
As I understand it, Robinhood is unable to provide shares of RSX for exercising puts. And the memo states if it is not possible for the delivering Clearing Member to effect delivery of the RSX shares on the designated settlement date, then the settlement obligations of both delivering and receiving Members shall be delayed until such time as OCC designates a new exercise settlement date, settlement method and/or settlement value.
It’s honestly mind blowing that the OCC, CBOE, and VanEck have not yet announced delistment/liquidation of RSX, but this is where we ended up. I would much rather just close out my position as it stands right now instead of dealing with the headache of Exercising and/or waiting for the liquidation announcement.
Thank you for your time and assistance."
Jasper Hodge at Fidelity just confirmed that all calls into Fidelity are recorded. Fidelity says due to the circumstances, nothing regarding RSX is allowed to be put into writing.
Jasper said he could not find the line I referenced in the OCC memo 50188 regarding cash settlement. After I told him it was on the bottom of the page, he said Fidelity will look more into this and will return my call regarding next steps and exercising. As of now, Fidelity will not allow exercising RSX puts and will not allow opening a short position.
This is beyond me. They pick and choose what is allowed to be in writing. Did you get a hold of their legal department?
If you are calling a broker and can’t get information in writing but you can record the conversation, this may help with laws if its ok to do so where you live, scroll down a few pages and its broken down by state. It says this list was last updated 01.05.21
Edit: am not a lawyer, maybe they can chime in if there are questions around this
This is what I’m still being told by RH -
“As of now, the deliverable of the contracts is still 100 shares of RSX. To exercise puts, you would need to hold enough shares long to do so. No cash settlement has been announced as of now, but that is ultimately up to the OCC. We are actively monitoring the situation in case anything changes, but this is where we are as of now”
Unfortunately for them, “Both the delivering and receiving Clearing Members are required to immediately notify OCC if they are unable to effect settlement.” means they have NO CHOICE to not notify OCC. They can either provide me a short position (which their platform cannot do) or they MUST notify the OCC.
Someone correct me if I’m wrong.
