Options Account Supervision (Cboe Rule 9.2)

Options carry unique risks that require specialized supervision. Cboe Rule 9.2 establishes the framework for how firms supervise options activities, centered on the Registered Options Principal (ROP).

Registered Options Principal (ROP)

• Persons supervising options sales practices must be designated as Options Principals
• Options Principals must pass the Series 4 examination (Registered Options Principal)
• The ROP must approve all new options accounts after reviewing customer information, including:
  • Financial status (income, net worth, liquid net worth)
  • Investment objectives (speculation, hedging, income)
  • Options experience (number of years, types of options traded)

Exam Tip: Gotchas

• Options accounts require a Series 4 ROP, not just any principal. A general securities principal (Series 24) alone is not sufficient for options account approval.
• The ROP must review financial status, objectives, AND options experience; all three elements are required.

Annual Supervision Report

• Options principals must submit a report to the firm's senior management at least annually
• The report must detail:
  • The firm's supervisory control system for options
  • A summary of test results and significant exceptions
  • Any amended supervisory procedures created in response to the findings
• This mirrors the general Rule 3120 annual report requirement but applies specifically to options activities

Exam Tip: Gotchas

• The options annual report mirrors Rule 3120 but is a separate, options-specific requirement.
• A firm can have both a general Rule 3120 report and a separate options supervision report.

Connection to the Broader Supervisory Framework

• Options supervision operates within the broader Rule 3110/3120 framework but adds the ROP requirement and specialized annual reporting
• A firm that trades both municipal securities and options needs qualified principals for each: a Series 53 for munis and a Series 4 for options