Dividend trade strategies are transacted by certain market makers who try to capture corporate dividend payments when individual customers leave deep-in-themoney call options unexercised on the day prior to a stock's ex-dividend date.

"As a securities exchange and a self-regulatory organization, it is incumbent upon us to identify potential risks in the U.S. market system. Dividend trades greatly increase systemic risk in the options industry due to the extremely large size of the positions, which could cause a substantial market disruption should a mistake occur in the clearing process," said Gary Katz, President and Chief Executive Officer of ISE. "In addition to the systemic risk created by dividend trades, they also disadvantage retail investors and undermine the hallmark of transparency in the listed options market."Dividend Trade Strategies in the U.S. Options Industry. The whitepaper explains the mechanics of the dividend trade strategy and concludes that the practice impacts the U.S. options market in the following ways:

* The risk of engaging in dividend trade strategies and making a mistake in the clearing process far outweighs any potential benefit for those who participate in these transactions.
* Individual investors who hold buy-write positions have a much higher chance of being assigned on their short calls, and therefore not collecting the dividend payment on their long stock position. Market Makers who engage in the dividend trade strategy step in and capture the dividend instead.
* Dividend trade strategies create the appearance of healthy order flow. For the individual investor who has been trained to associate high trading volume with news in the individual stock, these trades are very misleading.

To view the dividend trade volume data and to access ISE's Whitepaper Dividend Trade Strategies in the U.S. Options Industry, visit ise.com/dividendvolume.