November 2015 Newsletter

OCC Logo
OCC News

OCC's John Fennell and CalPERS’s Dan Kiefer Discuss New Liquidity Partnership

In This Issue

John Fennell

Photo courtesy of

“Clearinghouses play a real critical role in financial markets. If we don’t settle, that creates liquidity problems for the rest of the market and creates a loss of confidence.” – John Fennell

On September 30, 2015, John Fennell, OCC’s EVP of Financial Risk Management, and Dan Kiefer, CalPERS’s Portfolio Manager of Global Fixed Income, sat down with CIO Magazine’s Editor-in-chief and EVP K.P McDaniel at the eSecLending 2015 Annual Securities Financing Conference to discuss the innovative partnership between America’s largest public pension plan and the world’s largest equity derivative clearing organization.

During the discussion, held on the campus of Harvard University and streamed live via the Chief Investment Officer website, Fennell emphasized the importance of diversification of liquidity sources. “Our liquidity in the past has come from banks and brokers. So during a financial crisis when banks and brokers are feeling stressed, the clearinghouse is feeling stressed. We needed to find a source of liquidity that isn’t going to feel the same kind of stress as we are,” he said.

The partnership of OCC and CalPERS, in cooperation with eSecLending, was announced in March 2015. eSecLending is the administrative agent for the facility and supports CalPERS by offering an attractive yield within a tightly controlled operating environment.

The collaboration has not only helped OCC diversify and increase its committed liquidity resources but also offers a compelling risk-adjusted return for CalPERS. With a source of timely access to liquidity, OCC is able to meet payment obligations to clearing members in a timely way. This, in turn, promotes the uninterrupted flow of financial markets.

CalPERS, while maintaining their conservative risk profile, now has an established solution that achieves incremental risk-adjusted returns for their pensioners. The outcome of this partnership is, as Dan Kiefer states, a “win-win-win”.

“Once we saw that it was a mutually beneficial relationship, and each person had something to gain and I think it was a win-win-win because the market wins,” Kiefer said.

To view the CIO Magazine video, registration is required but is free of charge. Visit

Back to Top

VP of OIC Education Frank Tirado Discusses Upcoming Initiatives

Frank Tirado

Photo courtesy of the New York Stock Exchange.

What work is being done By OIC to connect with financial advisors?

Connecting with advisors requires leadership and collaboration. OCC understands this, and that’s why Options Industry Council (OIC) established the Advisor Leadership Council (ALC). OIC works with the Council to build the most engaging and relevant set of listed-options education programs and experiences for advisors. For example, OIC collaborated with NYSE recently at our joint Thought Leadership Forum on October 7th. A record number of advisors attended to hear ALC members and industry leaders, including Steve Sears of Barron’s and Dominic Chu of CNBC, discuss the very relevant theme of the event: Options: Solutions for a Season of Volatility. This event was a big success. More than 120 advisors representing 75 firms managing a combined $4.5 trillion in assets under management attended the Forum. We plan to work to take advantage of that momentum to create a stronger sense of collaboration with the financial advisor community.

How do financial advisors impact OIC and the growing use of listed options?

Financial advisors are a crucial part of the investing community. According to Cerulli Associates, there were roughly 285,000 financial advisors in the U.S. in 2014 and on average they each manage money for about 150 clients so their investment influence is substantial. Another survey conducted by the Financial Planning Association in 2015 stated that only 9% of advisors currently use or recommend listed options with their clients. So we believe the opportunity for growth is vast. Educating and informing the advisor community about the responsible use of listed-options is a key part of OIC’s mission and it is core to what we do on behalf of the industry.

What can we look forward to from OIC in the coming months?

First, our OIC Financial Advisor Forum will take place on May 12, 2016 at the Terranea Resort in California. We expect to attract more than 100 top advisors for the event with some interesting speakers and compelling content. Second, the OIC team will continue to strengthen its digital offering to advisors through webinars. We want to bring together leading voices in the listed-options space and elevate the voice of our Advisor Leadership Council. Third, OIC is working with several member firms and responding to their specific needs for content and tools that will help advisors facilitate conversations about the use of listed options with their clients.

What are you specifically looking forward to?

There is much to do to better serve the financial advisor community, but my vision for the future is optimistic. We want OCC and the Options Industry Council to be the first place advisors think about and go to when they are considering options and options strategies. We want OIC to be seen as the leading provider of online education in the listed options industry, and to be recognized as an organization that brings the right ideas, products, and solutions to market participants.

Back to Top

What does Cyber Security Mean for OCC?

Cybercrime is an ever-changing, growing threat for companies across all industries. OCC’s Chief Information Officer, Luke Moranda and Chief Security Officer, Dan DeWaal were joined by FBI Supervisory Special Agent Dan Weirzbicki at a recent OCC Academy event to discuss the different kinds of cybercrime, the variety of threat levels and how it applies to OCC. Here are some of their comments.

What is a security incident?

A security incident occurs when there is an event in which damage to, unauthorized use of, or exploitation of information exposes risk to its availability, integrity or confidentiality.

How important is cyber security for the FBI?

The FBI’s main priority is terrorism, but cyber security follows closely behind. Terrorists often times use computers and cyber means to gain sensitive information.

What is happening in the cyber security space?

There are several types of cyber threats: Distributed denial of service, malware, Trojan attacks, social engineering, spear phishing, Ransomware and viruses/worms. The most prevalent means of distributing one of these methods is through email. In fact, 95% of all cyber security breaches occur through email. Although there are other methods used—for example drive-by downloads, non-Internet attacks (e.g. distributing malware on USBs) and software vulnerabilities—a majority of issues occur from an infected email.

How does OCC remain current on cyber threats?

OCC actively participates and maintains leadership roles in several industry bodies. The partnerships allow OCC to demonstrate our subject matter expertise, provide trusted leadership to our industry and keep informed of cyber intelligence that helps OCC strengthen our defenses.

What can an employee do to avoid cyber threats?

There are a variety of ways an employee can make sure their computer is safe from cyber threats. The first, and most important, is not to click any links that are unfamiliar. If you get an email with a link that looks suspicious, send it to your IT support team to investigate. Additionally, don’t send any credentials through email. If an email prompts you to login, go directly to the site or call the business’s customer service.

Employees should also stay away from gossip sites, because these sites tend to draw a lot of traffic from quick campaigns so they are hardly ever maintained or updated. It is also highly recommended to choose lengthy passwords that are uncommon and to be careful as to which sites you store your credit card information.

Back to Top

New OIC Study Shows Increased Knowledge of Listed Options by Investors

The Options Industry Council (OIC), the educational cooperative run by OCC, the world's largest equity derivatives clearing organization, and the U.S. options industry, has released the results of a new study conducted by Harris Poll that shows that industry efforts to educate investors about the use of listed options are generating positive results.

Harris Poll conducted the 2015 OIC Study of Investors online from February 2 through July 22, 2015, among 964 investors. The study found that options users are passionate, active investors who are more likely to increase their trading of options than their trading of either stocks or bonds over the next year. A lack of understanding or knowledge is the major stumbling block preventing non-users from trading options now.

"OIC's mission is to help educate investors on the responsible use of listed options," said Scot Warren, OCC Executive Vice President of Business Development and OIC. "Due in large part to our educational programs and outreach, investors are becoming increasingly aware that listed options are a versatile financial risk management tool. As a result, investors' use of options has grown dramatically. Total trading volume of listed options in 1995 was 1.1 million contracts - an amount that is surpassed within the first half hour of trading today where the average daily volume exceeds 16 million contracts."

Options trading volume in 2014 was up 4 percent over 2013, marking the second best volume year in history and the fourth consecutive year options volume passed 4 billion contracts. Also, in August 2015, two top ten trading volume days were recorded with options trading volume reaching 39.4 million contracts on August 21 and 32 million contracts on August 24, marking the third and ninth highest volume days.

According to the study, 85 percent of listed options users consider themselves to be extremely knowledgeable investors compared to 66 percent of non-users. Additionally, users of listed options are much more likely than non-users to use a wider range of risk management tools, especially ETFs/investment trusts, ADRs, gold and futures/commodities. Furthermore, they are more likely to be early adopters of new products.

OIC sponsored this study by Harris Poll, as well as similar studies every five years since 1995, to better assess the interest level, knowledge and use of listed options by investors. This helps OIC better direct its listed options education efforts with investors on behalf of the listed options industry.

To access this study, visit The Options Industry Council 2015 Study of Options Investors.

Back to Top

Scot Warren Discusses OCC’s Stock Loan Program

Scot Warren

OCC is in the midst of reviving its capital base while recruiting agent leaders and their clients to join its ranks.

OCC continues to strengthen its risk management capabilities in securities lending. Scot Warren, OCC’s Executive Vice President of Business Development, discusses OCC’s strategy to strengthen the stock loan, futures and options franchises.

Warren explains that OCC is focused on serving market participants in the industry and doesn’t set targets for transaction volume or notional value. “We’re prepared to serve the industry and what it demands from a cleared stock loan program. We’ve taken a program of 10 clearing firms in 1993 to 70 clearing firms conducting an average of 5,000 trades a day with $190 billion in notional value,” he said.

OCC sees on average a 12 percent increase in trades and a 36 percent increase in notional value in its stock loan program. Since 2011, the company has seen an increase of over 1,000 percent in notional value. This reflects the growing need for OCC’s clearing capability from market participants.

As a CCP, OCC is a strong value proposition for market participants because of the regulatory balance sheet relief and collateral efficiencies it provides. OCC also looks at how the CCP program for stock loan can be expanded, with input from market participants and an immense amount of consideration and care.

“We’re working with a coalition of industry participants to ensure that we have the solution that not only meets the needs of today, but also those of tomorrow. A good example is our work with broadening the eligibility to participate and bringing in agent leaders,” Scot stated. Although eligibility for OCC’s stock loan program can be difficult to achieve, OCC is working with a coalition of industry participants to design exact specifications of how the market should function, and, based on that, will build a technological and regulatory framework.

“We’re at the point of putting together the nuts and bolts of determining how OCC’s stock loan program will work. The next step is a board of directors and regulatory approval before actually building out the solution,” Scot explains.

Being a foundation for secure markets, the key for OCC is innovation. As part of its collaboration efforts to secure new committed credit facilities, earlier this year OCC partnered with CalPERs, the California Public Employees’ Retirement System which is the largest U.S. pension fund.

Warren said, “We’ve had more interest in similar partnerships, but a committed credit facility is a function of the size of the need, and so we have the benefit of having more interest than we currently need.”

Along with developing the stock loan program, OCC is working to enhance the current securities lending program and expanding the risk management program.

Back to Top

EDGX Options (EDGX) Announced as the Newest Participant Exchange

EDGX Options (EDGX) has been approved by the U.S. Securities and Exchange Commission to become the newest participant exchange of OCC, intending to begin operations on November 2, 2015.

In preparation for the commencement of trading by EDGX Options, Clearing Members should review the following:

  • The EDGX identifier for OCC DDS messages will include the MIC code of “EDGO”.
  • The Exchange ID for EDGX will be “K”.
  • The Exchange Acronym for EDGX will be “EDGX”.
  • OCC will be providing DDS Security Definition messages (SecDefUpd) indicating the products that EDGX plans to trade prior to EDGX’s activation.
  • EDGX is expected to be added to ENCORE for the entry of CMTA agreements the week of October 26th.
  • If Clearing Members have CMTA agreements up at all options exchanges, OCC will automatically add the CMTA agreement for EDGX. If they are not up at all exchanges, Clearing Members will be required to update their CMTA agreements for EDGX via ENCORE. An update will be provided once a specific date has been determined.

Questions regarding trading on EDGX Options can be addressed to the BATS Trade Desk | | 913-815-7001.

If you have any questions, please contact your Clearing Member representative or the Member Services Help Desk at the following numbers: 800-621-6072 or 800-544-6091. Within Canada, please call 800-424-7320. Clearing Members may also e-mail us at

Back to Top

From Capitol Hill

OCC and the U.S. Security Markets Coalition worried together this summer to address the concerns of the listed options industry with the Fiduciary Proposal by the U.S. Department of Labor (DOL). On July 17, OCC and the Coalition submitted a comment letter to the mandated by FINRA and exchange rules and the options education provided by brokers to their customers not cause such brokers to be considered fiduciaries under the rule. A copry of their comment letter can be found on OCC's website at:

On August 13, Gary Katz, President and CEO of ISE, testified on behalf of the Coalition at a DOL hearing on the rule. A copy of his testimony can be found on OCC’s website at, and a video of his testimony can be found on the DOL’s website at: (

OCC and the Coalition, with TD Ameritrade, submitted a second comment letter to the DOL on September 24 to address certain questions posed by DOL staff during Gary Katz’s testimony. A copy of that comment letter can found on OCC’s website at:

OCC and the Coalition also worked together to educate Members of Congress about our concerns with the DOL proposal. As a result of these efforts, several members of the U.S. House of Representatives and the U.S. Senate sent letters to Secretary of Labor Thomas Perez requesting that listed options be included in any final rule the DOL adopts in response to the Proposal.

For instance, Representative Randy Hultgren (R-IL) and 43 fellow House Republicans on July 29 sent a letter to Secretary Perez arguing that investors should be able to continue to use listed options in their retirement accounts. In addition to Representative Hultgren’s letter, OCC and Coalition staff met with key members of the staff of Representative Carolyn Maloney (D-NY), a senior member of the House Financial Services Committee, who also sent a letter to the DOL requesting Secretary Perez to include listed options in final rulemaking.

A further example of OCC and the Coalition’s impact in elevating the importance of this issue on Capitol Hill is the August 7 letter from Senator Ron Wyden (D-OR) and seven other Democratic Senators to Secretary Perez asking him to clarify that retirement accounts of all sizes should continue to have the choice to use options to exercise risk management during times of volatility. OCC and the Coalition will continue to vigorously press the concerns of the listed options industry with the DOL and Congress on this important issue. The DOL is expected to promulgate a final rule in 2016.

Back to Top

OCC in the News

OCC's Craig Donohue Talks about Gender and Pay Equality

In remarks on October 15 to the 4th Annual Women in Listed Derivatives (WILD) Symposium In Chicago, OCC Executive Chairman Craig Donohue applauded the work of WILD to empower women and create more visibility and opportunity, but said much more needs to be done. Click here for more information.

OCC Comments on Unintended Consequences of The Leverage Ratio

OCC joined other derivatives exchanges and clearing member firms in sending a letter to the Bank of International Settlements and the European Commission regarding a number of unintended consequences of the leverage ratio using the current exposure method (CEM). Click here to view the full letter.

Grace Under Pressure: OCC's Chief Risk Officer Talks About Preparing for Systemic Threats

OCC's Chief Risk Officer, John Grace, spoke with John Lothian News about managing capital and operational risk as a Systemically Important Financial Market Utility (SIFMU). Watch the full interview on

OCC on Social Media

Follow OCC's Accounts:


Volume Update

Interested in reading about what is happening with options volume? Click here for OCC's monthly volume press release.

OCC News Archive

Click here for prior issues.

OCC Editorial Team

Scot Warren, Executive Editor
EVP, Business Development, Communications & OIC
(312) 322-6214

David Prosperi, Editor
FVP, Public Relations
(312) 322-4484

Angela Kotso
Senior PR Specialist
(312) 322-6267

Caroline Gillard
PR Specialist
(312) 322-4529

One North Wacker Drive, Suite 500, Chicago, IL 60606     (312) 322-6200     Email OCC

The information contained in this newsletter is for general information purposes only. Although every attempt is made to ensure the accuracy of the information, OCC assumes no responsibility for any errors or omissions. All materials pertaining to rules and specifications are made subject to and are superseded by the By-Laws and Rules of OCC.