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Filing Process for Private Third Party Options

You report securities holdings and transactions involving private third party options in the same manner as OTC options.

Insider-defined Security Designation

Insiders are required to add an insider-defined security designation when filing the acquisition of a third party derivative such as private options.

An initial report recording the opening balance of securities held for the insider-defined security and ownership type is required to be completed prior to posting any related transactions on SEDI. The steps are similar to Filing an Opening Balance on Initial Report with the exception that an insider-defined security is added when filing the report instead of selecting a security from the issuer’s outstanding securities list.

Once a transaction has been posted as an insider-defined security designation, all other transactions for those securities must be filed under that security designation to ensure proper balances of securities. SEDI calculates separate balances for insider-defined securities and issuer-defined securities.

When an insider acquires private options, these options are created for the transaction. Consequently, the private options are not included in the insider opening balance of securities held and the opening balance amounts are zero. The transaction could therefore result in a negative closing balance of securities/contracts held and/or equivalent underlying securities in the private options, depending on the type of option, until they are exercised or when they expire.

Acquisition of Private Third Party Options to Purchase Securities

If you acquire an option to purchase securities of the issuer from a person other than the issuer, this option is a separate class of security and you must report your holdings and transactions separately from other classes of securities, including incentive options or exchange traded call and put options.

You report securities holdings and transactions involving private third party options in the same manner as an acquisition of an OTC call option except:

• Designation of class of securities: Private options, with the underlying security designation, from the insider-defined securities list (the insider will need to create an insider-defined security designation if this is the first time filing the private option)
• Nature of transaction: Code 70 - Acquisition or disposition (writing) of third party derivative
• Date of expiry or maturity: indicate expiry date of the option

Granting of Private Third Party Options to Purchase Securities

If you grant a person an option to acquire securities you hold, this option is a separate class of security and must be reported separately from other classes of securities, including other incentive stock options or exchange traded call or put options.

You report securities holdings and transactions involving third party call options in the same manner as writing an OTC call option except:

• Designation of class of securities: Private options, with the underlying security designation, from the insider-defined securities list (the insider will need to create an insider-defined security designation if this is the first time filing the private option)
• Nature of transaction: Code 97 – Other (used when no other codes apply)

•  Disclose the number of contracts/securities “optioned” to the third party in the Number or value of securities or contracts disposed of and Equivalent number or value of securities disposed of fields

• Present balance of class of securities held: This is a negative balance of the number of options granted to the third parties
• Date of expiry or maturity: indicate expiry date of the option

Exercise of Option by Third Party

You report the exercise of option by the third party in the same manner as the exercise by third party of an OTC call option written by the insider.

You must report two separate transactions when an option you grant to a third party is exercised:

• An increase in the number of third party options held
• A decrease in the number of underlying securities held (e.g. common shares)

Key points are:

• Designation of class of securities: Private options (with the underlying security designation) from the insider-defined securities list
• Balance of private options class on last report: This will be a negative balance
• Nature of transaction: Code 97 – Other (used when no other codes apply)

•  Disclose the number of options and underlying securities exercised by the third party in the Number or value of securities or contracts acquired and the Equivalent number or value of underlying securities acquired fields for the private options class

•  Disclose the number of securities (e.g. common shares) disposed of on exercise by the third party in the Number or value of securities disposed of field for the underlying security class

Exercise of Option Granted by a Third Party

You report the exercise of option granted by third party in the same manner as an insider’s exercise of an OTC call option.

You must report two separate transactions when you exercise an option granted to you by a third party:

• A decrease in the number of third party options held
• An increase in the number of underlying securities held (e.g. common shares)

Key points are:

• Designation of class of securities: Private options (with the underlying security designation) from the insider-defined securities list
• Nature of transaction: Code 71 – Exercise of third party derivative

•  Disclose the number of options and underlying securities exercised for the option granted by the third party in the Number or value of securities or contracts disposed of and the Equivalent number or value of underlying securities disposed of fields for the private options class

•  Disclose the number of securities (e.g. common shares) acquired on exercise of the option granted by the third party in the Number or value of securities acquired field for the underlying security class

Instructions for Filing an Insider Report

Instructions to file an insider report for exchange traded options is similar to filing other option transactions with the exceptions noted above.

See:
Insider Report to Add an Insider-Defined Security Designation (e.g. Third Party Derivatives)

Insider Report for Stock Options 
Preliminary Information for Stock Option Filings

The process for filing third party derivatives is described in the following documents:

Insider Report for an Acquisition of an OTC Call Option

Insider Report for an Acquisition of an OTC Put Option

Insider Report for an Exercise of an OTC Call Option

Insider Report for an Expiry of an OTC Call Option

Insider Report for Writing of an OTC Call Option

Insider Report for Writing of an OTC Put Option