2021 Annual Report

Message from the CEO + COO

In a year of continued uncertainty, OCC remained steadfast as the foundation for secure markets providing industry leading clearance, settlement and financial risk management to market participants.

2021 once again brought record-breaking growth for the U.S. equity options market. Working in close collaboration with our clearing firms and participant exchanges, we collectively achieved a record level of contract volume. Total exchange-listed options cleared contract volume was 9.87 billion, up 32.2 percent compared to 2020, and equity options cleared contract volume was 9.37 billion contracts, up 33.7 percent compared to 2020. ETF options cleared contract volume of 2.70 billion saw a 5.1 percent increase compared to 2020 and index options volume was over 503 million, up 8.8 percent compared to 2020. 

In many ways, 2021 was a banner year for U.S. equity options growth, with the industry surpassing 2020’s annual volume record in October. With over 60 million contracts cleared in one day in January, open interest surpassing 500 million contracts for the first time in history in November, and total 2021 average daily cleared options volume at 39.17 million contracts, this past year showcased how the convergence of new market dynamics resulted in a historic year for U.S. equity options growth.

In a year of continued uncertainty, OCC remained steadfast as the foundation for secure markets providing world-class clearance and settlement services to all market participants.

OPERATIONAL EXCELLENCE

To help the industry move forward during this time of rapid growth, we have taken several significant steps to ensure the stability of our operations as well as the safety and well-being of our employees. Throughout 2021, OCC’s Business Continuity Planning (BCP) team bolstered their efforts to ensure our employees could continue to perform their jobs safely and effectively. Due to our consistency in processes and several key investments made to strengthen the resiliency of our clearing system, our operational infrastructure has once again risen to meet the demands of record volumes, even as we work diligently on our Renaissance Initiative which will replace our legacy technology infrastructure.

Building on our foundation of nearly 50 years of leading marketplace support and service, over the past years we have made significant enhancements to our initial margin modeling and stress testing methodology, updated sufficiency scenarios with information from March 2020 volatility to ensure we continue to deliver on our key responsibilities to our Clearing Members, participant exchanges and the investing public.

In 2021, the Securities and Exchange Commission (SEC) approved OCC’s proposed amendment to our Capital Management Policy to provide a minimum persistent level of ‘skin-in-the-game’ to ensure that OCC maintains alignment with the interests of its Clearing Members. Underpinning all these efforts is the strength and resiliency of our financial position, which is further detailed in a letter by our Chief Financial Officer, Amy Shelly.

Due to our consistency in processes and several key investments made to strengthen the resiliency of our clearing system, our operational infrastructure has once again risen to meet the challenges stemming from record volumes, even as we work diligently on our Renaissance Initiative.

LEADING A TRANSFORMATION

Throughout 2021, we continued to work diligently on our Renaissance Initiative, a multi-year effort to comprehensively redevelop and modernize our technology infrastructure. We believe that by further streamlining our operational framework, enhancing our risk tools and establishing a more robust data management system that we will be able to better serve our market participants.

As such, our planned technology enhancements, slated for release in 2024, will not only signify our commitment to promoting the broader financial system’s continuous innovation, but also to building the future foundation of secure markets.

In conjunction with our Renaissance Initiative, we also plan to expand our use of cloud technology to support our new core clearing, risk management, and data management applications currently under development. In October, we filed an Advance Notice in connection with our proposed adoption of Cloud Infrastructure for these purposes. We are pleased that the regulatory review is underway for this tremendous step in our planned path forward.

For 2022, we plan to remain focused on progressing towards a seamless technical and operational launch, planned for the second quarter of 2024. Specifically, in the third quarter of 2022, we plan to release our technical specifications as well as layouts and sample data. In 2022, we also plan to release enhanced functionality for our What-If Margin (WIM) simulation, offering an API-based approach to submitting a portfolio of positions before the launch of our new platform. Until that time, a detailed timeline is available on our website to support our Clearing Members and market participants through this multi-year process.

Most importantly, as we modernize our technology, we will continue to deliver state of the art clearing, settlement and risk management services to our members and market participants.

Our planned technology enhancements, slated for release in 2024, will not only signify our commitment to promoting the broader financial system’s continuous innovation, but also to building the future foundation of secure markets.

PRIORITIZING COMPANY CULTURE WITH A FOCUS ON DIVERSITY, EQUITY AND INCLUSION

Technology may be our cornerstone, but people are at the heart of OCC. Our colleagues are the true driving force for delivering our outstanding risk management, data and clearing systems.

As the global pandemic continued to disrupt all areas of life, we prioritized and improved our efforts to ensure our colleagues’ well-being by focusing on supporting their health and safety. Through added benefits; new platforms and channels of communication and safe interaction; and improved efforts committed to Diversity, Equity and Inclusion across our workforce, we are consistently working to enhance the experience of being part of the OCC team. We believe corporate culture starts at the top, and we prioritized enhanced communication from OCC’s leadership down to colleagues at the individual level with the help of OCC’s Culture Leadership team and Employee Network Groups.

To build trust in the marketplaces we serve as well as in our workplace, OCC is committed to Diversity, Equity and Inclusion.  In 2021, we launched our DEI Council: a group of employees who come together to provide leadership and governance on OCC’s DEI initiatives.

To increase the percentage of colleagues from historically marginalized groups at OCC, we partnered with various external organizations, such as The Greenwood Project and Financial Services Pipeline Initiative, to develop talent from underrepresented communities. Additionally, in 2021 we worked with organizations like Hispanic Alliance for Career Enhancement (HACE) to broaden our reach for recruitment; we also nominated colleagues to participate in HACE’s leadership accelerator programs, including their Emerging Latino Leaders and Mujeres de HACE programs.

We’re building relationships in the communities where we live and work by volunteering to help those in need and making contributions with a positive impact on social determinants of health, such as access to education and a safe place to live. In 2021, OCC partnered with, and matched donations to, iMentor in Chicago, Jonathan’s Place in Dallas and Edu-Futuro in Washington, DC.

As we continue our DEI journey, we know that progress is made through collaboration across all levels of the company as well as by partnering with community stakeholders, and we embrace the work and opportunities ahead.

Through added benefits; new platforms and channels of communication and safe interaction; and improved efforts committed to diversity, equity and inclusion across our workforce, we are consistently working to enhance the experience of being part of the OCC team.

DOING OUR PART FOR INVESTORS

The meteoric rise of options investing over the last two years, including growing retail investor participation, has highlighted the growing importance of investor education. OCC has long been committed to providing high quality, free content for investors, and we are making significant investments to enhance those offerings. Over the last few years, we have revamped our investor education offerings about the benefits and risks of options by modernizing and expanding our range of multimedia content and courses offered through the Options Industry Council.

By working closely with other industry and regulatory providers of investor education to better inform market participants, we rolled out a new version of the Characteristics and Risks of Standardized Options, also known as the options disclosure document (ODD), which was made available for distribution to investors by brokerages in late October. The restated ODD has a refreshed design and new format intended to support electronic delivery of the document by broker-dealers. It is the first step of a multi-pronged effort by OCC and the options exchanges to further enhance ODD’s user-friendliness.

Moving OCC and the industry forward in 2022 will rest largely on our ability to maintain the trust and confidence of the markets and investors we serve. By making OCC more resilient through innovation we can continue to support a robust and growing U.S. equity derivatives industry.

John P. Davidson
Chief Executive Officer

Scot E. Warren
Chief Operating Officer

By making OCC more resilient through innovation we can continue to support a robust and growing U.S. equity derivatives industry.
TheOCC.com