OCC Recovery Tools, Recovery and Orderly Wind-Down Plan Approved by SEC

Chicago, IL (August 24, 2018) – OCC, the world’s largest equity derivatives clearing organization, today announced that the U.S. Securities and Exchange Commission approved the company’s proposed recovery tools and proposed recovery and orderly wind-down (RWD) plan, providing critical tools designed to enable OCC to successfully manage extreme market disruptions in future financial crises.

OCC is the first Systemically Important Financial Market Utility (SIFMU) whose primary supervisory agency is the SEC to have its recovery tools and RWD plan approved by the SEC.

“Today’s approvals are significant accomplishments that allow OCC to further align its recovery and wind-down planning with its peer clearing organizations and conform to accepted international standards in the Principles for Financial Market Infrastructures,” said Craig Donohue, OCC Executive Chairman and Chief Executive Officer. “They also enhance OCC’s ability to successfully manage extreme market disruptions that may occur in future financial crises, which is critical to our mission of promoting stability and market integrity.”

The recovery tools and RWD plan provide several key enhancements to OCC’s resiliency:

Improved Assessment Powers: The improved assessment powers cap each clearing member’s aggregate liability to replenish the Clearing Fund at 200 percent of the member’s then-existing required contribution, during a minimum 15-day (maximum 20-day) cooling-off period.

• The improved assessment powers will increase the minimum amount of assessments available to OCC, while eliminating the unlimited demands on clearing members (which could have had a destabilizing effect during a crisis).
• The improved assessment powers also will provide clearing members with better clarity about their maximum exposure to OCC, thereby facilitating their own management of risk and, to the extent applicable, regulatory and capital considerations.

New Tools to Extinguish Losses: If an unprecedented loss event ever threatens to exhaust OCC’s Clearing Fund resources (inclusive of assessments), the new recovery tools would provide OCC with the ability to call for voluntary payments and voluntary tear-ups and, if ultimately necessary, to impose mandatory tear-ups to extinguish the positions causing such losses.

Updated RWD Plan: The updated RWD plan better prepares OCC for potential threats, however remote, to its viability and lays out critical steps that OCC could take to ensure continuity of its critical clearing services to participants in times of extreme financial distress. The updated RWD plan now includes OCC’s recovery tools and also reflects the significant organizational improvements that OCC has accomplished over the past few years.

About OCC

OCC is the world’s largest equity derivatives clearing organization and the foundation for secure markets. Founded in 1973, OCC operates under the jurisdiction of both the U.S. Securities and Exchange Commission (SEC) as a registered clearing agency and the U.S. Commodity Futures Trading Commission (CFTC) as a Derivatives Clearing Organization. Named 2018 Best Clearing House by Markets Media, OCC now provides central counterparty (CCP) clearing and settlement services to 19 exchanges and trading platforms for options, financial futures, security futures, and securities lending transactions. More information about OCC is available at www.theocc.com.