2020 Annual Report

Message from the OCEO

On behalf of our colleagues in Chicago, Dallas and Washington, D.C., we are pleased to report that despite the exceptional demands of the ongoing pandemic environment, OCC continued to provide world-class clearance and settlement services to market participants.

For financial markets, 2020 was a year like no other.

OPERATIONAL RESILIENCE

We regularly take steps to ensure the stability of our operations as well as the safety and well-being of our employees. OCC’s Business Continuity Planning (BCP) Team developed and implemented contingency strategies to ensure our employees could perform their jobs in adverse situations. Even before 2020, this planning included large-scale remote working tests with our offices in Chicago and Dallas. These efforts helped our BCP Team evaluate the functionality of OCC’s communications infrastructure, virtual networking capabilities and work management systems, which allowed us to transition to a remote working model with minimal disruption.

Over the past decade, we have seen a steady increase in cleared exchange-listed options volume. However, 2020 brought record-breaking growth for the U.S. equity options markets as well as unprecedented market volatility, and that extraordinary growth has continued into 2021. Throughout the pandemic, OCC’s operational infrastructure has proven to be resilient as we handled record volumes without any operations processing or human-related errors resulting in market disruption.

OCC’s exceptional performance during this period, while nearly 98 percent of employees worked from home, demonstrates our commitment to the operational resiliency and integrity of our services, while simultaneously providing exceptional customer service to our clearing members and participant exchanges. Moving forward, we will continue to deliver on our key responsibilities to our clearing members, participant exchanges and the investing public.

Over the past decade, we have seen a steady increase in cleared exchange-listed options volume. However, 2020 brought record-breaking growth for the U.S. equity options markets as well as unprecedented market volatility, and that extraordinary growth has continued into 2021.

FINANCIAL RESILIENCE

As our organization continues to transform, we also must manage OCC in a way that ensures we meet regulatory expectations as a systemically important financial market utility (SIFMU) while serving market participants as a financially responsible steward of clearing services.

OCC today is in a stronger and more resilient financial position than ever before. Key enhancements in 2020 include the approval of our Capital Management Policy by the U.S. Securities and Exchange Commission (SEC), and the implementation of Phase II and Phase III of our Financial Safeguards Framework (FSF) which included a “Cover Two” approach that allows OCC to handle the concurrent default of our two largest clearing members. In addition, OCC proposed a change to the Capital Management Policy to include a persistent minimum level of “skin-in-the-game” to align more closely with clearing members and reduce the likelihood of a draw on the clearing fund, which was approved by the SEC in 2021.

With a strong focus on expense discipline and operational excellence, OCC achieved significant operating leverage in 2020, allowing us to take steps to lower costs for market participants while continuing to invest in operations and technology enhancements. You can find more detailed information on our financial resiliency in the letter from our Chief Financial Officer, Amy Shelly.

OCC today is in a stronger and more resilient financial position than ever before.

TECHNOLOGY RESILIENCE

OCC’s Renaissance project is the most significant initiative we have undertaken in 20 years. Throughout 2020, we made progress in the development of the data, risk, and clearing pillars for our new platform, as well as the stock loan application. Our teams also created new user interfaces and enhanced our network infrastructure and reporting capabilities across applications.

When completed, the new platform will deliver increased business agility, more efficient and effective operations, and technology that is scalable and more resilient. Market users will experience benefits such as intuitive clearing member interfaces, self-service reporting, strengthened analytics with enhanced access to data, and customized solutions. As we develop the new system and features, we are maintaining our ongoing commitment to data and cyber security. These benefits should reinforce the confidence market participants have in OCC.

Ultimately, our colleagues will benefit from simpler processes and enhanced tools to perform their jobs and enhance their productivity. For the latest information on Renaissance and an up-to-date development timeline, visit our Transformation landing page here and Participant Resources here.

OCC’s Renaissance project is the most significant initiative we have undertaken in 20 years.

OUR PEOPLE

As you may have read in the letter from our Executive Chairman, Craig Donohue, our people were essential for ensuring the continued function of the markets during the pandemic. We made sure to prioritize our colleagues’ well-being during this time by focusing on supporting their health and safety through the expansion of benefits and guidance, new channels of communication with leadership, and virtual engagement as we each transitioned to working from home.

To foster connections across the company and maintain our culture during this time, we created a series of virtual events designed for colleagues to interact with each other as well as introduce new employees who were onboarded remotely to OCC. This included weekly all-colleague updates, speakers sponsored by our Employee Network Groups, networking small-group sessions, and virtual family events.

OCC also developed a roadmap to guide diversity and inclusion efforts, with the goals of becoming an employer of choice, attracting and retaining an increasingly diverse workforce, enabling workplace inclusion, and building a socially responsible corporate culture. To support these efforts, OCC officially added Diversity & Inclusion as one of its core values and developed a new Diversity & Inclusion Policy.

Our people were essential for ensuring the continued function of the markets during the pandemic.

SERVING OUR INDUSTRY

OCC continued to support the U.S. Securities Markets Coalition’s efforts in Washington, D.C., engaging with policymakers, regulators, and staff on issues of importance to the entire ecosystem of the listed options markets.

In response to industry research and feedback, OCC published “Optimizing Incentives, Resilience and Stability in Central Counterparty Clearing” in September, a paper in which we offer our perspective as a market utility on the evolution, strength and resilience of CCPs. In the spirit of transparency, we concurrently released the OCC Recovery and Orderly Wind-Down Plan Participant Guide to share enhanced details about what is (and is not) contained in the Plan and how it would be implemented should the need ever arise.

In addition, OCC, through the services provided by its Options Industry Council (OIC), reached hundreds of thousands of investors through webinars, podcasts and online courses as well as by responding to inquiries received by our investor services team. To add to our efforts to address critical topics for investors of all experience levels, we launched OCC Learning, a new learning management system to deliver free digital coursework for investors who want to build their knowledge. We also collaborated to produce a joint investor article with FINRA called “Trading Options: Understanding Assignment.”

In addition, OCC, through the services provided by its Options Industry Council (OIC), reached hundreds of thousands of investors through webinars, podcasts and online courses as well as by responding to inquiries received by our investor services team.

IN CLOSING

None of these accomplishments would have been possible without the hard work and dedication of our colleagues. Their level of collaboration and commitment sets a high standard for our industry and allows OCC to continually strengthen our role as a SIFMU.

We are proud to be part of a team of so many dedicated individuals who, regardless of their role at OCC, continuously work together to succeed in the face of extraordinary circumstances. We remain focused on our ability to maintain the trust and confidence of the markets and investors we serve, to make OCC more resilient and innovative, and to do our part to help grow and promote understanding of the U.S. equity derivatives industry.

John P. Davidson
Chief Executive Officer

Scot E. Warren
Chief Operating Officer

None of these accomplishments would have been possible without the hard work and dedication of our colleagues.
TheOCC.com