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Exercise by Exception Processing

Trading Term

A procedure used by OCC as an operational convenience for clearing members. Under these proceedings, OCC assumes a clearing member tendered exercise notices for options that are in-the-money by threshold amounts, unless specifically instructed not to do so. This procedure protects the owner from losing the intrinsic value of the option because of failure to exercise. Unless instructed not to do so, all expiring equity options held in customer accounts are exercised if they are in-the-money by a specified amount.

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