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An Advocate for the Listed U.S. Equities Options Industry

By Craig Donohue, OCC Executive Chairman
May 31, 2016

As the world’s largest equity derivatives clearing organization and the foundation for secure markets, we at OCC believe strongly in our purpose of ensuring confidence in the financial markets and the broader economy.

An important part of our values is serving market participants and the greater public interest in our role as an advocate for the listed U. S. equities options industry. The legislative, regulatory and policy initiatives impacting OCC, our clearing members and their customers reflect the global and interconnected nature of these markets. These external factors can sometimes disrupt the balance that we as independent risk managers strive to maintain. For this reason, we take seriously our role in educating policy makers about our markets and to advocate for legislation and regulation that maintains the efficiency and competitiveness of our markets.

Our efforts to ensure that OCC is recognized as a qualifying central counterparty (QCCP) under the European Market Infrastructure Regulation will continue. Like other U.S. central counterparties, this recognition will have significant positive impacts on the capital treatment of exposures to OCC held by European bank-affiliated clearing members and other market participants subject to Basel III capital regulation in Europe. Our unique regulatory oversight regime requires OCC to actively work with the U.S. Securities and Exchange Commission (SEC), the U.S. Commodity Futures Trading Commission (CFTC), the European Commission, and the European Securities Market Association (ESMA) to achieve this goal.

As a Systemically Important Financial Market Utility (SIFMU) and service provider to exchange and clearing members with a global customer base, OCC's efforts on the international regulatory and policy front have extended beyond seeking QCCP status. We have participated in international industry discussions and consultations emanating from the Committee on Payment and Settlement Systems and International Organization of Securities Commissions related to the Principles for Financial Market Infrastructure (PFMIs) that OCC must follow as a SIFMU. The issues presented by the PFMIs range from cybersecurity to governance to recovery and resolution. We expect these international standards-setting bodies to remain active throughout the rest of the year.

In partnership with the U.S. Securities Markets Coalition, OCC strives to advance its leadership role in Washington, D.C. For example, in partnership with the Coalition, we educated Members of Congress and the U.S. Department of Labor about the potential adverse consequences that a proposed fiduciary rule would have on individual investors who use exchange-listed options to manage financial risk in their retirement accounts. We also continued our advocacy efforts with the Coalition and others in the industry on various tax initiatives and bank capital rules that, if implemented, would adversely impact U.S. equities options markets. We will also continue our educational and advocacy efforts in response to the SEC’s proposed rule-making that would limit the use of certain derivatives by regulated investment companies.

As the financial industry continues to face strong economic and regulatory headwinds, OCC's mission remains the same. We will continue to sustain our resiliency, foster innovation, and lead advocacy and educational efforts with global policy makers to ensure that OCC continues to drive industry growth and contributes to the reduction of systemic risk in the financial system.

Categories: Clearing Services, Compliance, DOL Fiduciary Rule, Regulation