Options Clearing Corporation

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Options Clearing Corporation
Industry Financial services
Founded 1973 (1973)
Headquarters Chicago, Illinois, U.S.
Products Clearing house (finance), Equity derivatives clearing
Website www.theocc.com

Options Clearing Corporation (OCC) is a United States clearing house based in Chicago. It specialises in equity derivatives clearing, providing central counterparty (CCP) clearing and settlement services to 14 exchanges. Instruments include options, financial and commodity futures, security futures and securities lending transactions.

Like all clearing houses, the OCC acts as guarantor between clearing parties ensuring that the obligations of the contracts they clear are fulfilled. It currently holds approximately $100 billion of collateral deposited by clearing members and moves billions of dollars a day. In 2015 cleared contract volume totaled 4.2 billion making it the third highest annual total in OCC's history.[1]

As of 2011, OCC was the largest equity derivatives clearing organization in the United States and 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 stock and other equity issues, stock indexes, foreign currencies, interest rate composites and single-stock futures. As a registered Derivatives Clearing Organization (DCO) under CFTC jurisdiction and a designated SIFMU under the Dodd-Frank Act, OCC offer clearing and settlement services for transactions in futures and options on futures contracts. OCC, in conjunction with the U.S. Option Exchanges, fund an educational organization called the Options Industry Council (OIC). OIC is dedicated to helping individual investors, financial advisers and institutions understand the benefits and risks of exchange-listed options.

OCC is overseen by a clearing member dominated board of directors[2] and operates as a financial market utility, receiving most of its revenue from clearing fees charged to its members.


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 CBOE Clearing Corporation.

Clearing volumes have increased dramatically since its launch, reflecting the growing use of equity options. In October 2000, for example, the clearinghouse reported a clearing monthly volume record of 75.3 million contracts. In August 2011, OCC reported a record monthly volume of 550 million contracts.[3] 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 issued a statement in response to the downgrade, that included this quote from OCC's then- chairman and CEO Wayne P. Luthringshausen: “This rating change will have no negative impact on OCC’s operations or our ability to meet our obligations to OCC’s clearing members." [4]

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.[5] In July, 2012 the Financial Stability Oversight Council (FSOC) designated OCC as a Systemically Important Financial Market Utility (SIMFU) as a part of a part of the Dodd-Frank financial overhaul law.[6] OCC officially received regulatory approvals to clear OTC equity index options in January 2014. The launch of the OTC S&P 500 equity index option clearing services is expected in the second quarter of 2014.[7]

In September 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.[8] This same month, OCC appointed Craig Donohue as Executive Chairman.[9] In an interview with Crain's Magazine, Donohue considered himself a change agent in the industry and will continue to be at OCC. His role designated him to oversee a transition of Cahill's responsibilities to other OCC executives during the search; Chief Operating Officer Michael McClain,[10] 46, took on the additional title of president as part of the transition.[11]

On September 29, 2014, OCC and the U.S. options exchanges announced the adoption of new principles-based risk control standards. The new standards include price reasonability checks, drill-through protections, activity-based protections and kill-switch protections, pending regulatory approval. The reforms are designed to reduce the risk of errors or unintended activity that could cause or contribute to a financial loss to market participants and OCC.[12] Also subject to regulatory approval, starting on June 30, 2016, OCC will impose 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. OCC also announced a $39 million refund to clearing members and the dividend of approximately $17 million to Stockholder Exchanges to be dispersed in Q1 of 2016 along with OCC financial statements.[13]



  • Craig S. Donohue, Executive Chairman
  • Michael McClain, President, Chief Operating Officer
  • John Fennell, Executive Vice President, Financial Risk Management
  • John J. Grace, Executive Vice President and Chief Risk Officer
  • Scot Warren, Executive Vice President, Business and Product Development
  • Jean Cawley, Senior Vice President and Corporate Secretary
  • Joseph Kamnik, Senior Vice President and General Counsel
  • Jim Kustusch, Senior Vice President – Operations
  • Kimberly McGarry, Senior Vice President and Chief Financial Officer
  • Luke Moranda, Senior Vice President and Chief Information Officer
  • Tracy Raben, Senior Vice President, Chief Human Resources Officer
  • Richard Wallace, Senior Vice President and Chief Compliance Officer

Participant exchanges and clearing members[edit]

OCC's participant exchanges include: BATS, Boston Options Exchange, Chicago Board Options Exchange, EDGX, International Securities Exchange, NASDAQ OMX BX, Inc., NASDAQ OMX PHLX, Nasdaq Stock Market, NYSE MKT, and NYSE Arca. Its clearing members serve both professional traders and public customers and comprise approximately 120 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, NYSE Liffe, NASDAQ OMX Futures Exchange and ELX Futures, as well as security futures contracts traded on OneChicago and options on futures contracts traded at NYSE Liffe US. In addition, OCC provides central counterparty services for two securities lending[15] market structures, OCC's OTC Stock Loan Program and AQS, an automated marketplace for securities lending and borrowing.

OCC is also a sponsor of the Options Industry Council.


Key to a clearing organization is margin requirement, which manages its credit risk (risk of member default).

From the 1980s, the margining system was called known as TIMS (Theoretical Intermarket Margin System). In 2006, this system was replaced by a new system called STANS (System for Theoretical Analysis and Numerical Simulations).[16]

OCC Annual Reports[edit]

The Options Industry Council (OIC)[edit]

Since 1992, the contributions that OIC has made to the investing and brokerage communities have been significant to the growth of the options industry. Today, retail investors, financial advisors, and institutional investors continue to show interest for information and education on exchange listed options. OIC delivers its education through a comprehensive website, featuring online courses, podcasts, webcasts and videos. OIC also offers live seminars, mobile tools and one on one investor services support from options professionals. All of OIC’s offerings are provided free of charge.


  1. ^ "OCC Fact Sheet" (PDF). OCC. December 1, 2015. 
  2. ^ "OCC Board Member Bios". OCC. December 1, 2015. 
  3. ^ "OCC Timeline". OCC. May 18, 2012. 
  4. ^ "OCC Statement Regarding the S&P Change on OCC Counterparty Risk". OCC. August 8, 2011. 
  5. ^ "S&P And The Options Clearing Corporation Bring Central Counterparty Clearing To OTC Index Options". OCC. July 29, 2013. 
  6. ^ "OCC Announces Its Designation as a Systemically Important Financial Market Utility". OCC. July 19, 2012. 
  7. ^ "OCC Prepares to Launch OTC S&P 500 Equity Index Options Clearing". PRWeb. January 28, 2014. 
  8. ^ "OCC Plan May Cut Capital Costs for Europe Options Traders". Bloomberg. September 30, 2013. 
  9. ^ "OCC Names Craig S. Donohue Executive Chairman Effective January 1, 2014". OCC. September 18, 2013. 
  10. ^ "OCC Executives". OCC. December 1, 2015. 
  11. ^ "U.S. options clearinghouse CEO to retire after year in top spot". Reuters. September 22, 2014. 
  12. ^ "OCC and The U.S. Options Exchanges Announce New Risk Control Standards to Strengthen Industry Protections". OCC. October 1, 2014. 
  13. ^ "OCC Declares Clearing Member Refund and Dividend for 2015 and Reduction of Fees under Approved Capital Plan". OCC. December 17, 2015. 
  14. ^ "OCC Announces Board Appointments And Nominations, Adopts Governance Enhancements". March 13, 2014. 
  15. ^ "Clearing Evolution: Michael McClain on the changes at OCC". JLN. May 6, 2015. 
  16. ^ The Options Clearing Corporation Launches New Risk Management Methodology

External links[edit]