On Monday, OCC announced it launched its over-the-counter (OTC) S&P 500??equity index option clearing services on Friday, April 25. This has brought capital and operational efficiencies and enhanced customer protections to the OTC equity derivatives marketplace, according to OCC.
The voluntary equity OTC clearing solution began its first of two phases for the dealer-to dealer market, including first-day participants?of?JP Morgan Clearing Corp, Deutsche Bank, Barclays, Morgan Stanley, and BNP Paribas, among others.?All of these participants completed rigorous pre-launch testing between their firms, MarkitSERV and OCC.
Friday’s first cleared trade came at 10:38 a.m. CDT. It had been bilaterally negotiated between JP Morgan Clearing Corp. and Morgan Stanley, affirmed on MarkitSERV?s platform, and seamlessly routed to OCC for clearing. ?
Craig Donohue, Executive Chairman of OCC, said in a press release,??We are very pleased to be the first clearing house in the U.S. to clear OTC equity index options and bring the strength of OCC?s systems and risk management to this marketplace. OCC?s clearing members can leverage our existing clearing and risk management systems with no additional connectivity, while the entire marketplace benefits from the?protections of a central counterparty and OCC?s financial safeguards. This clearing service is an example of our commitment to provide value-added services and be a source of strength and reliability for the industry.?
The second phase which is dealer-to-client clearing, is scheduled to launch later in the year. Margin offsets will remain an important feature but this other phase will also bring clients greater customer protection through the Securities Investor Protection Corporation (SIPC). The recent rule change approvals enhances the protections afforded to customers in the event of a liquidation of their broker-dealer; it serves to mitigate counterparty risk.