Options Clearing Corporation

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Options Clearing Corporation
IndustryFinancial services
Founded1973 (1973)
HeadquartersChicago, Illinois, U.S.
ProductsClearing house (finance), Equity derivatives clearing

Options Clearing Corporation (OCC) is a United States clearing house based in Chicago. It specializes in equity derivatives clearing, providing central counterparty (CCP) clearing and settlement services to 16 exchanges. Started by Wayne Luthringshausen and carried on by Michael Cahill, trust in the company was built. 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 it clears are fulfilled. It currently holds approximately $100 billion of collateral deposited by clearing members and moves billions of dollars a day. In 2016, cleared contract volume totaled 4.17 billion making it the fifth 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 Systemically Important Financial Market Utility (SIFMU) under the Dodd-Frank Act,[2] OCC offers 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[3] 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.[citation needed]

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.[4] 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."[5]

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.[6] In July, 2012 the Financial Stability Oversight Council (FSOC) designated OCC as a Systemically Important Financial Market Utility (SIFMU) as a part of a part of the Dodd-Frank financial overhaul law.[7] 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 took place in April 2014.[8]

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.[9] This same month, OCC appointed Craig Donohue as executive chairman.[10] In an interview with [Crain's Magazine],[11] 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,[12] 46, took on the additional title of president as part of the transition.[13]

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.[14] 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.[15]



  • Craig S. Donohue - executive chairman
  • John P. Davidson - chief executive officer
  • Scot Warren - executive vice president and chief operating officer
  • John Fennell - chief risk officer and executive vice president
  • Dale Michaels - executive vice president of financial risk management
  • Jennifer Baum - chief compliance officer and senior vice president
  • Dan Busby - senior vice president, operations
  • David A. Hoag - chief information officer and senior vice president
  • Janet Angstadt - chief legal officer and general counsel
  • Joseph Kamnik - chief regulatory counsel and senior vice president
  • Mark Morrison - chief information security officer and senior vice president
  • Hugo Mugica - chief audit executive and senior vice president
  • Carla Dawson - chief human resources officer and senior vice president
  • Amy C. Shelly - chief financial officer and senior vice president
  • Vishal Thakkar - senior vice president, enterprise risk management
  • Julie Bauer - executive vice president, government relations and investor education[17]

Participant exchanges and clearing members[edit]

OCC's participant exchanges include: BOX Options Exchange LLC, Cboe BZX Exchange, Inc., Cboe C2 Exchange, Inc., Cboe EDGX Exchange, Inc., Cboe Exchange, Inc., Miami International Securities Exchange, LLC, MIAX PEARL, LLC, 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 are approximately 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, 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[18] 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).

Since the 1980s, the margining system has been 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).[19]

The Options Industry Council (OIC)[edit]

OIC is an industry resource funded and managed by OCC to provide unbiased education to individual investors, financial advisors, and institutional asset managers about the benefits and risks of using exchange-listed options as risk management solutions to gain market exposure and generate income. OIC hosts free options webinars, videos, podcasts and live events, distributes educational literature, maintains a website. OIC's Roundtable is the independent governing body of the council and is composed of representatives from the U.S. options exchanges, member brokerage firms and OCC.

See also[edit]


  1. ^ "OCC Fact Sheet" (PDF). OCC. March 6, 2017.
  2. ^ "OCC Lingo: SIFMU Stands For Clearinghouse Changes". John Lothian News (JLN). 23 April 2015. Retrieved 4 November 2018.
  3. ^ "OCC Board Member Bios". OCC. December 1, 2015.
  4. ^ "OCC Timeline". OCC. May 18, 2012.
  5. ^ "OCC Statement Regarding the S&P Change on OCC Counterparty Risk". OCC. August 8, 2011.
  6. ^ "S&P And The Options Clearing Corporation Bring Central Counterparty Clearing To OTC Index Options". OCC. July 29, 2013.
  7. ^ "OCC Announces Its Designation as a Systemically Important Financial Market Utility". OCC. July 19, 2012.
  8. ^ "OCC Successfully Launches Clearing OTC S&P 500 Equity Index Options on April 25". PRWeb. April 28, 2014.
  9. ^ "OCC Plan May Cut Capital Costs for Europe Options Traders". Bloomberg. September 30, 2013.
  10. ^ "OCC Names Craig S. Donohue Executive Chairman Effective January 1, 2014". OCC. September 18, 2013.
  11. ^ "After remaking CME, Donohue is at it again, at OCC". Crain's Chicago Business. Retrieved 4 November 2018.
  12. ^ "OCC Executives". OCC. December 1, 2015.
  13. ^ "U.S. options clearinghouse CEO to retire after year in top spot". Reuters. September 22, 2014.
  14. ^ "OCC and The U.S. Options Exchanges Announce New Risk Control Standards to Strengthen Industry Protections". OCC. October 1, 2014.
  15. ^ "OCC Declares Clearing Member Refund and Dividend for 2015 and Reduction of Fees under Approved Capital Plan". OCC. December 17, 2015.
  16. ^ "Donohue Agrees to Stay on as OCC Executive Chairman for Three Additional Years". September 12, 2016.
  17. ^ "Executive Biographies".
  18. ^ "Clearing Evolution: Michael McClain on the changes at OCC". JLN. May 6, 2015.
  19. ^ The Options Clearing Corporation Launches New Risk Management Methodology

External links[edit]