OCC to slash clearing fees in offer refunds to members
04 August 2020 Chicago
Image: Rudy Balasko/Shutterstock.com
The Options Clearing Corporation (OCC) is set to reduce its clearing fees and offer a refund to members worth up to $100 million of fees for the year as part of plans to overhaul its business structure.
OCC will reduce clearing fees from 5.5 cents per contract to 4.5 cents per contract for users of its US equity derivatives markets from 1 September, subject to regulatory review.
Moreover, the Chicago-based clearinghouse is budgeting to provide a clearing fee refund to member firms of approximately $80-$100 million for 2020 after year end.
The refund is subject to current volume trends continuing, and board review and approval, OCC confirms.
The Chicago-based equity derivatives organisation also aims to seek regulatory approval from the US Securities and Exchange Commission (SEC) to amend its Capital Management Policy with a persistent minimum amount of ‘skin-in-the-game’.
The clearing corporation announced a plan, which will establish a minimum amount of stake in the result, which will further strengthen pre-funded financial resources, further align the interests of OCC management and market participants; and align more closely with international standards.
John Davidson, OCC CEO, explains that as a result of achieving significant operating leverage, which is consistent with its Capital Management Policy “we are now in a position where we can take steps to lower costs for market participants, while continuing to invest in our operational resiliency through our renaissance initiative to enhance our technology”.
Scot Warren, OCC chief operating officer, adds: “Establishing a minimum amount of skin-in-the-game will further enhance our alignment with our clearing member firms, as well as reduce the likelihood of a draw on the clearing fund and the resulting cost borne by those firms.
“We take seriously our duty to manage OCC in a way that ensures we meet regulatory expectations and responsibly invest in OCC’s infrastructure, while also serving market participants as a financially responsible steward of clearing services.”
Earlier this year, the SEC formally approved OCC’s Capital Management Policy, which established OCC’s initial approach to skin-in-the-game.
OCC will reduce clearing fees from 5.5 cents per contract to 4.5 cents per contract for users of its US equity derivatives markets from 1 September, subject to regulatory review.
Moreover, the Chicago-based clearinghouse is budgeting to provide a clearing fee refund to member firms of approximately $80-$100 million for 2020 after year end.
The refund is subject to current volume trends continuing, and board review and approval, OCC confirms.
The Chicago-based equity derivatives organisation also aims to seek regulatory approval from the US Securities and Exchange Commission (SEC) to amend its Capital Management Policy with a persistent minimum amount of ‘skin-in-the-game’.
The clearing corporation announced a plan, which will establish a minimum amount of stake in the result, which will further strengthen pre-funded financial resources, further align the interests of OCC management and market participants; and align more closely with international standards.
John Davidson, OCC CEO, explains that as a result of achieving significant operating leverage, which is consistent with its Capital Management Policy “we are now in a position where we can take steps to lower costs for market participants, while continuing to invest in our operational resiliency through our renaissance initiative to enhance our technology”.
Scot Warren, OCC chief operating officer, adds: “Establishing a minimum amount of skin-in-the-game will further enhance our alignment with our clearing member firms, as well as reduce the likelihood of a draw on the clearing fund and the resulting cost borne by those firms.
“We take seriously our duty to manage OCC in a way that ensures we meet regulatory expectations and responsibly invest in OCC’s infrastructure, while also serving market participants as a financially responsible steward of clearing services.”
Earlier this year, the SEC formally approved OCC’s Capital Management Policy, which established OCC’s initial approach to skin-in-the-game.
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