OCC implements Phase III of FSF
07 July 2020 Chicago
Image: amasterphotographer/Shutterstock
The US Securities and Exchange Commission has approved phase III of the Options Clearing Corporation (OCC)’s financial safeguards framework (FSF) for liquidity.
OCC’s liquidity risk management structure is devised to ensure that OCC holds sufficient liquid resources to satisfy settlement obligations in a broad range of foreseeable stress scenarios.
Phase III of FSF implementation will see changes to how OCC utilises the output of existing credit stress testing methodology for liquidity stress testing, as well as increase the base liquidity resources to $6.5 billion.
OCC will also be allocated additional resources by clearing member organisation groups responsible for stressed liquidity demands that exceed available resources, and will hold the authority to incrementally increase the clearing fund cash requirement.
Phase III rules will also implement a two-day notification period on all clearing fund collateral substitutions of government securities for cash that exceeds OCC’s minimum requirement.
Scot Warren, COO of OCC, commented: “The implementation of the FSF phase III enhancements is an important milestone for OCC, our clearing members, and market participants. The enhancements are designed to meet new and evolving regulatory requirements and industry best practices.”
Dale Michaels, executive vice president, financial risk management at OCC, added: “This implementation represents the culmination of several years of collaborative work with our regulators to enhance OCC’s resiliency as a systemically important financial market utility.”
“These enhancements increase market transparency and establish a new approach to liquidity stress testing and determining the adequacy, sizing, and sufficiency of OCC’s liquidity resources.”
OCC’s liquidity risk management structure is devised to ensure that OCC holds sufficient liquid resources to satisfy settlement obligations in a broad range of foreseeable stress scenarios.
Phase III of FSF implementation will see changes to how OCC utilises the output of existing credit stress testing methodology for liquidity stress testing, as well as increase the base liquidity resources to $6.5 billion.
OCC will also be allocated additional resources by clearing member organisation groups responsible for stressed liquidity demands that exceed available resources, and will hold the authority to incrementally increase the clearing fund cash requirement.
Phase III rules will also implement a two-day notification period on all clearing fund collateral substitutions of government securities for cash that exceeds OCC’s minimum requirement.
Scot Warren, COO of OCC, commented: “The implementation of the FSF phase III enhancements is an important milestone for OCC, our clearing members, and market participants. The enhancements are designed to meet new and evolving regulatory requirements and industry best practices.”
Dale Michaels, executive vice president, financial risk management at OCC, added: “This implementation represents the culmination of several years of collaborative work with our regulators to enhance OCC’s resiliency as a systemically important financial market utility.”
“These enhancements increase market transparency and establish a new approach to liquidity stress testing and determining the adequacy, sizing, and sufficiency of OCC’s liquidity resources.”
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