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Top Minds: Failure is not an option

Bill Coffin | August 30, 2016

Imagine being responsible for facilitating the execution of some $453 billion in equities derivatives and securities transactions a day, holding about $100 billion in collateral to backstop those transactions, and ultimately clearing about 4.2 billion contracts a year. Welcome to the Options Clearing Corporation, the world’s largest clearinghouse for listed equity derivatives.

The OCC (not to be confused with the Office of the Comptroller of the Currency) is, in its own words, “the seller to every buyer and the buyer to every seller,” for its various member firms, which collectively represent 13 options exchanges (a 14th exchange—ISE Mercury— will join on Feb 16), four futures exchanges and some 120 clearing member firms. If any of these clearing firms fails to honor its trade obligation, the OCC steps in to honor the guarantees that have been issued.

By acting as a go-between for derivatives trading, the OCC provides a critical layer of stability to the world’s...

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