OCC
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| OCC | |
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| Founded | 1973 |
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| Headquarters | 125 S. Franklin Street, Suite 1200, Chicago, IL 60606
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| Key People | Craig Donohue, Executive Chairman |
| Products | Clearing services |
| @OptionsClearing | |
| Profile | |
| Page | |
| Website | www.optionsclearing.com |
OCC (formerly The Options Clearing Corporation), founded in 1973, is the world's largest equity derivatives clearing organization. OCC processes trades for all 15 U.S. options exchanges and for some futures markets. It has about 115 clearing members that include the biggest U.S. broker-dealers, futures commission merchants and non-U.S. securities firms.[1]
In 2020, OCC cleared 7.52 billion total contracts and 7.47 billion options contracts, a record that topped a previous high set in 2018 of 5.24 billion total contracts and 5.14 billion options contracts. In a year-over-year comparison with 2019, OCC had a 51.2 percent increase in total contracts cleared and a 52.4 percent increase in options contracts cleared. [2] [3]
Based in Chicago, OCC is dedicated to promoting stability and financial integrity in the marketplaces by focusing on sound risk management principles. By acting as guarantor, OCC ensures that the obligations of the contracts it clears are fulfilled.[4]
In March of 2011, the organization revised its name and brand identity from The Options Clearing Corporation to OCC to reflect its more diverse suite of clearing solutions.
Although OCC began as a clearinghouse for listed equity options, the company has evolved to clear a multitude of products. OCC operates under the jurisdiction of both the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC). Under its SEC jurisdiction, OCC clears transactions for put and call options on common stocks and other equity issues, stock indexes, foreign currencies, interest rate composites and single-stock futures (which are dually regulated by the SEC and CFTC) in the U.S.
As a registered Derivatives Clearing Organization (DCO) under CFTC jurisdiction, OCC also provides clearing and settlement services for transactions in futures and options on futures. Additionally, OCC provides central counterparty clearing and settlement services for two securities lending market structures, OCC's OTC Stock Loan Program and AQS, an automated marketplace for securities lending and borrowing.
OCC is a Primary Member of CCP Global, the global association of Central Counterparties (CCP), which represents 42 members who operate more than 60 individual CCPs across EMEA, the Americas and the Asia-Pacific region. [5]
OCC was designated a systemically important financial market utility (SIFMU) by the Financial Stability Oversight Council in July of 2012. That designation was part of the Dodd-Frank financial overhaul law.[6]
Overseeing OCC is a clearing member-dominated board of directors. OCC operates as an industry utility and receives most of its revenue from clearing fees charged to its members. OCC offers volume discounts on fees and, as applicable, refunds excess fees to its clearing members.
OCC's participant option exchanges include: BOX Options Exchange, Cboe BZX Exchange, Inc., Cboe C2 Exchange, Inc., Cboe EDGX Exchange, Inc., Cboe Exchange, Inc., Miami International Securities Exchange, LLC, MIAX PEARL, LLC, MIAX Emerald, Nasdaq GEMX, LLC, Nasdaq ISE, LLC, Nasdaq BX, Inc., Nasdaq MRX, LLC, Nasdaq PHLX, LLC, Nasdaq Options Market, LLC, NYSE American Options, LLC, and NYSE Arca, Inc. Its clearing members serve both professional traders and public customers and comprise about 115 of the largest U.S. broker-dealers, futures commission merchants and non-U.S. securities firms. OCC's goal is to service clearing members and the exchanges through an operating plan that emphasizes timely, reliable and cost-efficient clearing operations.
OCC also serves other markets, including those trading commodity futures, commodity options and security futures. OCC clears futures contracts traded on CBOE Futures Exchange, and also cleared security futures contracts traded on OneChicago before it closed.
The OCC was owned equally by so-called legacy exchanges: Intercontinental Exchange's NYSE ARCA, NYSE MKT, Nasdaq and Cboe Global Markets. With the acquisition of ISE by Nasdaq, Nasdaq's stake in OCC grew from 20 percent to 40 percent.[7]
History[edit]
The Options Clearing Corporation (OCC) was founded in 1973, initially as a clearinghouse for five listed markets for equity options. Prior to its establishment, and due to a great deal of encouragement from the SEC, the Chicago Board Options Exchange had its own clearing entity, the Chicago Board Options Exchange Clearing Corporation. Clearing volumes have increased dramatically since its launch, reflecting the growing use of equity options. In 2001, for example, the clearinghouse sported average daily volumes of 3.1 million contracts.[8] In 2016, average daily volume was 16.1 million contracts. [9] [10] Average daily cleared options volume topped 20 million per day in 2018.
In 1992, the OCC, in conjunction with the U.S. options exchanges, created the Options Industry Council (OIC), a cooperative tasked with educating the investing public about options.
The OCC started a securities lending program, the Hedge System, in 1993, to allow clearing members to reduce their margin requirements. Clearing of stock loans got a boost in January 2009 when OCC began clearing all stock loans on AQS, an alternative trading system.[11] The program underwent substantial growth in the 2010s, with 1.4 million new stock loan transactions cleared in 2015.[12]
On August 8, 2011, Standard & Poor's lowered the ratings on clearing facilities including the OCC to double-A-plus, one step below the coveted triple-A rating. OCC's then-chairman and CEO Wayne P. Luthringshausen said the rating change would have no negative impact on OCC’s operations or ability to meet its obligations to clearing members. [13]
Also in 2011, Standard & Poor's and OCC announced a licensing agreement whereby OCC would clear over-the-counter (OTC) options based on the S&P 500. The deal marked the first time a clearing house would clear OTC options on S&P indexes. It also included the S&P MidCap 400 and S&P SmallCap 600.[14] The OTC S&P 500 equity index option clearing services were launched in 2014.[15]
In September of 2013, OCC filed to become compliant with the European Market Infrastructure Regulation, which will enable banks registered in the region to trade U.S. options without incurring higher capital costs for firms there who want to trade U.S. equity derivatives. [16]
In 2014, OCC and the U.S. options exchanges adopted new principles-based risk control standards designed to reduce the risk of errors or unintended activity that could contribute to a financial loss to participants or the OCC. The new standards included price reasonability checks, drill-through protections, activity-based protections and kill-switch protections. [17] Also, starting on June 30, 2016, OCC imposed an additional $.02 charge per contract side on clearing members for transactions that have been executed at exchanges that have not demonstrated compliance with the exchange risk control standards.
On March 6, 2015, the SEC approved OCC's capital plan increasing shareholders' equity from $25 million at the end of 2013 to $247 million through the retention of $72 million in 2014 earnings and receipt of $150 million in equity capital contributions from OCC's stockholder exchanges. Under the plan, the stockholder exchanges also committed to provide up to $117 million in capital in the event of unexpected losses, giving OCC access to about $364 million in equity capital resources. [18] A stay was subsequently put on the approval order for the capital plan, instituted automatically under SEC rules because petitions had been filed requesting review by the full commission. The stay was lifted in September of 2015,[19] but in February of 2019 The SEC rejected OCC's plan to boost cash reserves, dealing a blow to what had been one of the clearing firm’s key initiatives since the financial crisis. OCC will now need to submit a revised capital plan in order to comply with regulations, according to the SEC filing.[20]
OCC announced in 2016 that it would be moving both its Chicago HQ and its Dallas office to a larger spaces in their respective cities.[21]
In January of 2019 OCC announced the Renaissance Initiative, a multi-year investment to redevelop and modernize the company's risk management, clearing and data systems. The project is the biggest upgrade to the OCC's technology in 20 years. The OCC will replace most of its systems, with some of the work carried out in-house and some provided by Cinnober.[22] It expects to turn off the old software in December 2021.[23]
Executive Chairman Craig Donohue said that when completed, the project "will enhance OCC's resiliency, improve our compliance posture, and help us operate in a more effective and efficient manner." [24]
The SEC approved Phase II of the OCC's Financial Safeguards Framework (FSF) on December 11, 2019. The approved changes to OCC's rules, clearing fund, and stress testing and margin methodology were implemented on December 16.[25]
Management Restructuring[edit]
On December 31, 2013, longtime CEO and chairman Wayne P. Luthringshausen, who worked on the development of the OCC (then the Chicago Board Options Exchange Clearing Corporation) in 1973 and shortly thereafter became CEO, retired from the clearinghouse. Upon his retirement, the OCC split the roles of CEO and chairman, with Michael Cahill becoming CEO. The management moves continued in January 2014 when Craig Donohue became executive chairman. He became CEO in September 2016 and oversaw an overhaul of the OCC's upper management team and transition to a larger and better capitalized organization.
Cahill retired from OCC at the end of 2014 after the company announced the move in September. He worked at OCC for 32 years. The flurry of managerial moves came after the SEC criticized the OCC's risk management and compliance practices in 2013. [26]
Donohue stepped down as CEO in December 2018, with John Davidson taking the post, from his position as president and COO. Donohue remains chairman.[27]
Key People[edit]
Executives:[28]
Craig S. Donohue, Executive Chairman
- Andrej Bolkovic Chief Executive Officer of OCC.jpg
Andrej Bolkovic, Chief Executive Officer
Janet Angstadt, Chief Legal Officer
Julie Bauer, Chief External Relations Officer
Jennifer Baum, Chief Compliance Officer
Dan Busby, Chief Operating Officer
- Megan Cohen General Counsel and Corporate Secretary of OCC.jpg
Megan Cohen, General Counsel and Corporate Secretary
Carla Dawson, Chief Human Resources Officer
- Mike Hansen Chief Clearing and Settlement Services Officer.jpg
Mike Hansen, Chief Clearing and Settlement Services Officer
David Hoag, Chief Information Officer
Dale Michaels, Chief Financial Risk Officer
Mark Morrison, Chief Information Security Officer
Hugo Mugica, Chief Audit Executive
- Mike Nowak Chief Financial Officer of OCC.jpg
Mike Nowak, Chief Financial Officer
Vishal Thakkar, Chief Risk Officer
Board Members: [29]
- Craig S. Donohue, Executive Chairman and CEO, OCC
- Michael Blaugrund, Chief Operating Officer, New York Stock Exchange
- Stuart Bourne, Managing Director, Global Head of Prime Services, Bank of America
- Dr. Thomas R. Cardello, Founding Member, Venice Group
- Maria Chiodi, Managing Director, General Counsel Department at Credit Suisse Securities (USA) LLC
- Alicia Crighton, Managing Director, Goldman Sachs
- Mark Dehnert, Former Financial Executive
- Boudewijn Duinstra, Chief Executive Officer, ABN AMRO Clearing USA
- Thomas A. Frank, Executive Vice President and Chief Information Officer, Interactive Brokers Group, LLC
- Meyer (Sandy) Frucher, Vice Chairman, Nasdaq, Inc.
- Rob Hocking, Senior Vice President, Head of Multi-Asset Solutions and Derivatives Strategy, Cboe Global Markets
- Kevin Kennedy, Senior Vice President-Head of Product Management for North America Market Services, Nasdaq, Inc.
- Elizabeth K. King, President, ESG and Chief Regulatory Officer, Intercontinental Exchange
- Susan E. Lester, Former Financial Executive
- Joseph Lewis, Managing Director, Co-Head of Corporate Hedging and FX Solutions, Jefferies Group LLC
- Stephen Luparello, Managing Director and General Counsel, Citadel Securities
- Peter Maragos, Founder and Chief Executive Officer, DASH Financial Technologies
- Faris Matalka, Managing Director, Charles Schwab
- Susan O'Flynn, Managing Director and Global Head of CCP Strategy and Resource Optimization, Morgan Stanley
- Alice P. White, Economist
Resources[edit]
Comprehensive Options Expiration Calendar[edit]
Volume[edit]
The OCC offers customizable trade volume searches, among other tools, at Market Data.
OCC News[edit]
The OCC provides current and archived news issues that display what the company has been doing throughout the year internally, externally, and on Capitol Hill. These articles can be found over at its OCC newsroom.
OCC Annual Reports[edit]
- OCC 2021 Annual Report Moving the Industry Forward
- OCC 2020 Annual Report Uncertain Times, Clear Resolve
- OCC 2019 Annual Report Into Tomorrow Transforming OCC
- OCC 2018 Annual Report Clear the Path
- OCC 2017 Annual Report Innovate, Educate, Advocate
- OCC 2016 Annual Report Innovation, Resiliency, Excellence
- OCC 2015 Annual Report Preparing for Tomorrow
- OCC 2014 Annual Report The Only Constant Winner - 2016 FCS Portfolio Awards, Silver, Silver Trumpet Award-2016 Golden Trumpet Awards
John Lothian Video Interviews[edit]
Ushering In The OCC's Renaissance - John Davidson, OCC
The OCC’s ENCORE clearing system, while resilient, is long in the tooth and inflexible. OCC’s Project Renaissance aims to revamp the central counterparty’s data, risk management and clearing systems. The OCC chose Cinnober as a partner for the multi-year project. While that key initiative is something the OCC has planned for years, the SEC’s decision not to renew the clearinghouse's capital plan was a curveball. In this video from JLN’s Industry Leader Series, OCC CEO John Davidson talks about those two developments.
Cybersecurity and Technology Upgrades - John Davidson, OCC
The OCC is in the process of making what is a big decision for a systemically important financial market utility (SIFMU) - how to best upgrade a tech stack responsible for clearing millions of options and futures contracts daily.
References[edit]
- ↑ U.S. options clearinghouse CEO to retire after year in top spot. Reuters.
- ↑ OCC Clears Record-Setting 7.52 Billion Total Contracts in 2020. OCC.
- ↑ OCC clears record volumes for US exchange listed options in 2020. The TRADE.
- ↑ What is OCC?. OCC.
- ↑ CCP Global Members. CCP Global.
- ↑ OCC Announces Its Designation as a Systemically Important Financial Market Utility. OCC.
- ↑ Nasdaq buys Deutsche Boerse options market for $1.1 billion. Bloomberg.
- ↑ OCC 2001 Annual Report. OCC.
- ↑ OCC Timeline. OCC.
- ↑ OCC 2016 Cleared Contract Volume Fifth Highest Ever. OCC.
- ↑ OCC Stock Loan Programs. OCC.
- ↑ OCC 2015 Annual Report. OCC.
- ↑ OCC Statement Regarding the S&P Change on OCC Counterparty Risk. OCC.
- ↑ S&P And The Options Clearing Corporation Bring Central Counterparty Clearing To OTC Index Options. OCC.
- ↑ OCC Prepares to Launch OTC S&P 500 Equity Index Options Clearing. PRWeb.
- ↑ OCC Plan May Cut Capital Costs for Europe Options Traders. Bloomberg.
- ↑ OCC and The U.S. Options Exchanges Announce New Risk Control Standards to Strengthen Industry Protections. OCC.
- ↑ SEC Approves New OCC Capital Plan. SEC.
- ↑ OCC Applauds SEC Decision to Discontinue Stay and Proceed with Review of Capital Plan. OCC.
- ↑ SEC Rejects Capital Plan by Options Clearinghouse. The Wall Street Journal.
- ↑ OCC expands, plans to move Chicago HQ. Crain's Chicago Business.
- ↑ OCC selects clearing system from Nasdaq-owned Cinnober. Cinnober press release.
- ↑ Volatility spike prompts reforms at equity-options clearing house. The Financial Times.
- ↑ OCC Launches Renaissance Initiative to Modernize Technology Infrastructure. OCC.
- ↑ Phase II of OCC Financial Safeguards Framework Approved by SEC. OCC.
- ↑ U.S. options clearinghouse CEO to retire after year in top spot. Reuters.
- ↑ Options Clearing CEO to Step Down. Wall Street Journal.
- ↑ OCC Announces Board Appointments And Nominations, Adopts Governance Enhancements. Mondo Visione.
- ↑ Board Member Biographies. The Options Clearing Corporation.