What Is the Choices Clearing Company (OCC)?
The Choices Clearing Company (OCC) is a company that acts as each the issuer and guarantor for options and futures contracts. The biggest fairness derivatives clearing group on the planet, it operates below the jurisdiction of the Commodities Futures Buying and selling Fee (CFTC) and the U.S. Securities and Exchange Commission (SEC).
The OCC shouldn’t be confused with the U.S. Treasury’s Workplace of the Comptroller of the Currency, which additionally goes by the acronym ‘OCC’.
- The Choices Clearing Company (OCC) serves as a central clearinghouse and regulator for listed choices traded in america below the auspices of the SEC and CFTC.
- The OCC clears exchange-traded transactions in choices contracts, rate of interest composites, and single-stock futures.
- Worth-added options supplied by the OCC embody analysis companies, investor schooling, buyer assist, and advertising and marketing outreach.
- Modifications have been made so the OCC might adapt its operations to raised tackle danger after the 2008 monetary disaster.
Understanding the Choices Clearing Company (OCC)
The target of the OCC, which was based in 1973, is to instill stability in the equity derivatives market. Based on its mission assertion, the OCC is a customer-driven clearing organization that delivers danger administration, clearance, and settlement companies.
Below its SEC jurisdiction, the OCC clears transactions for put and name choices, inventory indexes, foreign currency echange, rate of interest composites, and single-stock futures. In the meantime, as a registered derivatives clearing group (DCO) below CFTC jurisdiction, it gives clearing and settlement companies for transactions in futures merchandise, in addition to options on futures.
The OCC additionally affords central counterparty clearing and settlement companies for securities lending transactions.
The group primarily acts as a guarantor to make sure the obligations of the contracts it clears are fulfilled. A board of directors (B of D) populated by representatives from exchanges, clearing members and administration oversee the OCC, and most of its income comes from clearing fees charged to its members.
The OCC additionally gives analysis companies and different value-added options that assist and develop the markets that it serves. The company serves 16 completely different exchanges, together with the C2 Choices Trade, Chicago Board Choices Trade, Worldwide Securities Trade, Nasdaq OMX BX, Nasdaq OMX PHLX, NYSE American Choices, and NYSE Arca Choices.
The OCC cleared almost 7.52 billion contracts in 2020, the business’s highest ever annual quantity.
Historical past of the Choices Clearing Company (OCC)
The aftermath of the 2008 financial crisis introduced new scrutiny and goal to the OCC. Modifications have been made so it might adapt its operations to raised tackle danger. Federal regulators started to see the OCC as an more and more integral a part of the governance and oversight of the markets. The heightened consideration targeted on the group introduced with it some unfavorable assessments by regulators.
In 2013, the SEC criticized the OCC’s administration and planning for the way in which it dealt with market-wide points. The SEC additionally mentioned the OCC’s administration at the moment lacked acceptable supervision when it comes to corporate governance. The SEC additional cited quite a few conflicts of interest with the administration and board of administrators, which known as into query the group’s dedication to regulatory compliance.
This led to the introduction of latest government management, together with the addition of latest positions to bolster the OCC’s compliance efforts.
The OCC’s administration and management presently encompass a various group of individuals from completely different elements of the funding world, together with exchanges, clearing members, and different administrators. As of Oct. 2021, key figures embody:
- Craig S. Donohue: Earlier than becoming a member of the OCC as government chair in 2014, Donohue spent greater than 20 years in world financial markets. He was CEO of CME Group between 2004 and 2012 and has been beforehand acknowledged by Harvard Enterprise Evaluate and Institutional Investor Journal.
- John P. Davidson: As chief executive offer (CEO), Davidson is answerable for oversight of the OCC’s monetary and company risk management, compliance, and expertise capabilities. Davidson grew to become CEO in 2019, two years after becoming a member of the OCC as president and chief working officer (COO). Based on his bio, he has greater than three many years’ value of expertise in world monetary markets.
- Scot Warren: Warren is the company’s government vice chairman and chief operating officer (COO). Amongst different issues, he oversees the OCC’s finance, venture administration, operations, and human resources (HR). Warren beforehand served as senior managing director of the CME Group’s Fairness Merchandise and Index Companies.