OCC STRONGLY RECOMMENDS CLEARING MEMBERS CONTACT ALL HOLDERS OF FQN OPTIONS TO APPRISE THEM OF THE CONTENTS OF THIS MEMO.

On Wednesday, June 26, 2002, prior to the opening, the NASDAQ NMS suspended trading in WorldCom Inc. - MCI Group ("MCIT"). The Chicago Board Options Exchange ("CBOE"), The American Stock Exchange ('AMEX"), The Philadelphia Stock Exchange ("PHLX") and The Pacific Exchange ("PCX") also halted trading in FQN options on June 26, 2002.

On July 23, 2002 WorldCom Inc. - MCI Group began trading under the symbol "MCWEQ". Effective July 30, 2002, MCWEQ began trading Over The Counter.

FQN OPTION EXERCISE

There continues to be no OCC restriction on the exercise of FQN put and call options, and OCC does not currently anticipate imposing such restrictions.

Settlement of FQN option exercise/assignment activity continues to take place through National Security Clearing Corporation ("NSCC"). Clearing Members' obligations to deliver MCWEQ stock to NSCC, and the consequences of any failure to deliver, will be governed by the rules of NSCC.

FQN OPTION EXERCISE

September series of FQN options expire September 21, 2002. OCC has determined to use a closing price obtained from the OTC Bulletin Board in this weekend's expiration processing, assuming such prices continue to be available. OCC anticipates expiring FQN options will be processed in the normal fashion this weekend, including the use of the customary in-the-money thresholds to effect exercise of expiring, FQN options.

CUSTOMER EXERCISE INSTRUCTIONS

Clearing Members are reminded that exercise thresholds are employed by OCC in expiration processing solely as an operational convenience, as described in interpretation .02 to OCC Rule 805(d): "The exercise thresholds provided for in Rule 805(d) and elsewhere in the rules are part of the administrative procedure established by the Corporation to expedite its processing of exercise of expiring options by Clearing Members, and are not intended to dictate to Clearing Members which positions in customer's accounts should or must be exercised."

Clearing Members should remind customers of their obligations to submit exercise instructions before expiration, as described in the Options Disclosure Document "Characteristics and Risks of Standardized Options", p. 50:

"An option holder who intends to exercise an option before expiration must give exercise instructions to his brokerage firm before the firm's cut-off time for accepting exercise instructions on the last trading day before expiration. Many brokerage firms accept standing instructions to exercise, or have procedures for the exercise of, every option, which is in the money by a specified amount at expiration. These procedures often incorporate by reference OCC's administrative procedures that provide for the exercise of every option that is in the money by a specified amount at expiration unless the Clearing Firm carrying the option in its accounts instructs OCC not to exercise the option. Investors should determine from their brokerage firm the applicable cut-off times, the firm's procedures for submitting exercise instructions, and whether any of their options are subject to automatic exercise. Investors should also determine whether the exercise of their options is subject to standing instructions of their brokerage firm, and, if so, they should discuss with the firm the potential consequences of such instructions."

The CBOE, AMEX, PHLX and PCX have advised OCC Exchange Rules governing the submission of exercise notices will continue to apply in the normal fashion on September 20, 2002.

CATEGORY: OPERATIONS

SUB-CATEGORY: TRADING HALT