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Options Clearing Corporation (OCC)

Options Clearing Corporation (OCC)
InvestingLaws and RegulationsSECSec and Regulatory Bodies

What Is the Options Clearing Corporation (OCC)?

The Options Clearing Corporation (OCC) is an organization that acts as both the issuer and guarantor for options and futures contracts. The biggest equity derivatives clearing organization in the world, it operates under the jurisdiction of the Commodities Futures Trading Commission (CFTC) and the U.S. Securities and Exchange Commission (SEC).

The OCC ought not be mistaken for the U.S. Depository's Office of the Comptroller of the Currency, which additionally goes by the abbreviation 'OCC'.

Understanding the Options Clearing Corporation (OCC)

The objective of the OCC, which was established in 1973, is to impart stability in the equity derivatives market. As per its mission statement, the OCC is a customer-driven clearing organization that conveys risk management, clearance, and settlement services.

Under its SEC jurisdiction, the OCC clears transactions for put and call options, stock indexes, foreign currencies, interest rate composites, and single-stock futures. In the mean time, as a registered derivatives clearing organization (DCO) under CFTC jurisdiction, it gives clearing and settlement services to transactions in futures products, as well as options on futures.

The OCC additionally offers central counterparty clearing and settlement services for securities lending transactions.

The organization basically acts as a guarantor to guarantee the obligations of the contracts it clears are satisfied. A board of directors (B of D) populated by delegates from exchanges, clearing individuals and management supervise the OCC, and a large portion of its revenue comes from clearing fees charged to its individuals.

The OCC likewise gives research services and other value-added arrangements that support and develop the markets that it serves. The corporation serves 16 distinct exchanges, including the C2 Options Exchange, Chicago Board Options Exchange, International Securities Exchange, Nasdaq BX Options, Nasdaq PHLX, NYSE American Options, and NYSE Arca Options.

The OCC cleared almost 7.52 billion contracts in 2020, the business' highest ever annual volume.

History of the Options Clearing Corporation (OCC)

The result of the 2008 financial crisis brought new examination and purpose to the OCC. Changes were made so it could adjust its operations to better address risk. Federal regulators started to consider the OCC to be an inexorably indispensable part of the governance and oversight of the markets. The elevated consideration zeroed in on the organization brought with it a few unfavorable evaluations by regulators.

In 2013, the SEC censured the OCC's management and planning for the manner in which it took care of vast issues. The SEC additionally said the OCC's management around then needed fitting supervision in terms of corporate governance. The SEC further refered to various [conflicts of interest](/irreconcilable situation) with the management and board of directors, which called into question the organization's commitment to regulatory compliance.

This prompted the presentation of new executive leadership, including the expansion of new situations to support the OCC's compliance efforts.

Current Leadership

The OCC's management and leadership currently comprise of an assorted team of individuals from various parts of the investment world, including exchanges, clearing individuals, and different directors. As of Oct. 2021, key figures include:

  • Craig S. Donohue: Before joining the OCC as executive chair in 2014, Donohue spent over 20 years in global financial markets. He was CEO of CME Group somewhere in the range of 2004 and 2012 and has been recently recognized by Harvard Business Review and Institutional Investor Magazine.
  • John P. Davidson: As chief executive offer (CEO), Davidson is responsible for oversight of the OCC's financial and corporate risk management, compliance, and technology capabilities. Davidson became CEO in 2019, two years subsequent to joining the OCC as president and chief operating officer (COO). As per his profile, he has over thirty years' worth of experience in global financial markets.
  • Scot Warren: Warren is the corporation's executive vice president and chief operating officer (COO). In addition to other things, he regulates the OCC's finance, project management, operations, and human resources (HR). Warren recently filled in as senior overseeing director of the CME Group's Equity Products and Index Services.

Features

  • Changes have been made so the OCC could adjust its operations to better address risk after the 2008 financial crisis.
  • The Options Clearing Corporation (OCC) fills in as a central clearinghouse and regulator for listed options traded in the United States under the sponsorship of the SEC and CFTC.
  • The OCC clears exchange-traded transactions in options contracts, interest rate composites, and single-stock futures.
  • Value-added arrangements given by the OCC incorporate research services, investor education, customer support, and marketing effort.