OCC Says Pre-Trade Risk Controls Add Resiliency to Markets

July 14, 2016
Chicago -

Saying its proposed rule change to the U.S. Securities and Exchange Commission on pre-trade risk controls served as a catalyst to spur significant change in the listed equity options market, OCC, the world's largest equity derivatives clearing organization, today said it is withdrawing the proposal.

"We firmly believe the development of our risk control principles served as the catalyst for significant and positive change in the resiliency of the listed options market, to the credit of the options exchanges and the benefit of the entire options industry," said Craig Donohue, OCC Executive Chairman. "Since our May 2014 press release, 14 options exchanges have filed at least 37 rule changes that are consistent with the risk controls articulated in our proposal. These improvements are demonstrable steps that bolster the resiliency of the options markets against the risk from erroneous trading activity and render our review of options exchange pre-trade risk controls and associated surcharge for non-compliance redundant.

"While OCC supports the continued development and implementation of such controls, we believe any further work in this regard is best undertaken by the SEC at this time. We also believe that it is part of OCC's core mission to ensure the robustness and resiliency of the listed options markets, and we will continue to advocate for such on behalf of the industry whenever we can."

In 2014 and subsequent to numerous trading firm errors, SEC Chair White requested self-regulatory organizations to work collaboratively to develop concrete measures to address specific areas where resilience of market systems can be improved. In response, in May 2014, OCC and all of the U.S. options exchanges jointly announced the adoption of pre-trade risk control principles designed to enhance the monitoring of trading activity on a real-time basis and reduce the risk of errors that pose a material risk to OCC and can and have caused significant market disruption. The proposed rule change associated with the Risk Controls was filed with the SEC on March 4, 2016.

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