2. The sources of price information used to price credit default options are subject to a lack of transparency and. at times. illiquid markets. This is attributable to, among other things: (1) the absence of last sale information and the limited availability of quotations for the reference oblige- tion(s). (2) lack of ready availability of information on related products traded primarily in the over-the-counter market, and (3) the fact that related over-Me-counter market credit derivative transactions are privately negotiated and may not be made public in a timely fashion or at all. 3. Dealers in the underlying debt securities and in the over-the-counter credit derivatives markets have access to private quotation networks that give actual current bids and offers of other dealers. This information is not available to most investors. As a result, these dealers may have an advantage over participants with regard to credit default options. 4. If the listing options market determines that a credit default option is subject to a redemption event (i.e.. the issuer or guarantor pays off the reference obligation), the option will expire worthless unless a credit event has been confirmed to have occurred prior to the effective date of the redemption event. As a result, purchasers of such options will lose their premium since there is no chance of occur- rence of a credit event for the reference entity. On the other hand. if a redemption event occurs but a credit event Is confirmed to have occurred prior to the effective dale of the redemption event. a seller would be obligated to pay the cash settlement amount even though a holder of the refer- ence obligation may not incur a loss. 5. Since succession events are determined by the listing options market, credit default options may be modi- fied to specify a different reference entity or several different reference entities. As a result, there may be new reference obligations that have higher o