Message from the Executive Chairman

2022 highlighted one of the best features of the American financial system: our ability to innovate, which drives opportunity and maintains our role as an economic leader in the global marketplace. While new approaches and technologies can experience growing pains as we saw in 2022, innovation is a critical part of our ongoing evolution. It also underscores the value and safeguards of traditional market infrastructures.

As a Systemically Important Financial Market Utility (SIFMU), OCC is committed to harnessing the benefits that innovations can provide to market participants in a way that upholds our daily obligations and role as a steward of secure markets for all investors. We are innovating and evolving OCC, while enhancing our existing operations to promote stability and market integrity every day.

We take our role as a SIFMU very seriously, and our entire organization is committed to striving for excellence in fulfilling our important role in the marketplace. As referenced in the CEO letter from John Davidson and Andrej Bolkovic, we reached settlements with the U.S. Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) regarding OCC’s error concerning the implementation of the liquidation cost charge in the calculation of our Clearing Fund. We sincerely regret the error that occurred and have since completed significant portions of the necessary remediation efforts to ensure systems are in place to swiftly detect similar issues should they ever occur again in the future. Our many stakeholders – exchanges, clearing firms, the investing public and our regulators – expect OCC to deliver at the highest possible level, and we are committed to exceeding those expectations.

Given options’ connection to underlying assets, the markets OCC clears are deeply intertwined with the broader financial equity markets that individuals and investors use to invest, save and manage risk. Delivering and maintaining secure, well-functioning financial markets, where growth and innovation can thrive, requires the joint efforts of many entities relying on each other to bring their best every day. This is a group effort made up of clearinghouses, exchanges, intermediaries, market makers and regulators working together to precisely manage the many moving parts that underpin our financial system and to educate and protect its investors. It is a big responsibility to operate in this ecosystem, and OCC is up to the challenge of doing our part, alongside our partners, to ensure confidence in the financial markets and the broader economy.

As a Systemically Important Financial Market Utility (SIFMU), OCC is committed to harnessing the benefits that innovations can provide to market participants in a way that upholds our daily obligations and role as a steward of secure markets for all investors.

Serving a Broadening Base of Investors

This year proved to be another record-breaker for options volume – total cleared contract volume for the year reached a new industry record surpassing 10 billion. The number of market participants and the ways in which they use products that OCC clears also continues to grow and evolve. I am gratified that OCC continues to deliver, in a consistent and timely way, our vital clearing and settlement services, as well as risk management each day.

OCC is able to meet these demands by putting the right people and processes in place – supported by both innovation and investment to give our employees, business partners and market participants the tools they need to optimize their engagement with the options markets.

Importantly, as more and new investors use options trading as part of their overall strategies, we remain committed to providing free, engaging investor education at all levels of knowledge. We use a variety of channels to deliver our content, including live events, webinars, podcasts and interactive online courses. As part of that commitment to accessible education, in 2022, following the redesign of the Options Disclosure Document (entitled “Characteristics and Risks of Trading Standardized Options”) we designed and launched a mobile-friendly quick guide to help investors better navigate this vital document. In the coming year, we will continue to build on these efforts to serve investors, partnering with exchanges, intermediaries and regulators to provide education and resources to the investing public.

This year proved to be another record-breaker for options volume – total cleared contract volume for the year reached a new industry record surpassing 10 billion.

Innovation and Investment in our Fundamental Infrastructure

As part of our long-term investment and transformation, OCC is availing ourselves of new technologies and approaches to operate in a modern era. I am proud that OCC was the first SIFMU to petition the Securities and Exchange Commission to use the Cloud for clearing, risk management and data management applications.

We are excited that in 2023, OCC can continue to advance our efforts to utilize cloud-based technology for our mission critical operations. Doing so will allow us to use the resiliency, security and capacity benefits that come with the Cloud for the benefit of all market participants. Utilizing this technology will provide our future clearing system, Ovation, with six distinct cloud locations for operations. Given OCC’s crucial role in the markets, we have further committed to invest in and operate a tertiary, on-premises data center that we can rely on in the unlikely event of a widespread Cloud outage. As further detailed in the CEO letter, this investment, alongside all the other development work in our Renaissance initiative, signifies our commitment to enhance business agility and operational efficiency as well as to monitor and manage risk.

In the meantime, OCC continues to make significant investments to upgrade our existing hardware and software to ensure the continued resiliency of our current clearing platform, ENCORE. We are making continuous enhancements and infusing flexibility in our existing operations when possible. In these ways as well, we aim to balance the best of innovation with our commitment to security and resiliency.

OCC was the first SIFMU to petition the Securities and Exchange Commission to use the Cloud for clearing, risk management and data management applications.

Further Enhancing Financial Resiliency and Receiving International Recognition

OCC has strengthened our financial resiliency exponentially over the past few years, and 2022 added more accomplishments to this trend.

Several years ago, OCC determined that we would exceed U.S. regulatory requirements and maintain sufficient financial resources to cover an unlikely concurrent default of our two largest clearing member firms (commonly known as “Cover 2”). In the years since, we have established our Capital Management Policy and our approach to Skin-in-the-Game, and we have made other strides to strengthen our financial position. In 2022, OCC’s analysis of the markets and related scenario testing drove our decision to request access to additional cash in the unlikely event of a member default. OCC sought and received a “no objection” from the SEC to expand our liquidity facilities. The ability to increase our funding sources by $2.5 billion to a new total of $10.5 billion was founded on steps we have taken over the years to create and ensure access to different funding sources, including OCC’s syndicated credit facility, the Non-Bank Liquidity Facility program and Clearing Members’ Clearing Cash Fund Requirement.

These efforts undoubtedly contributed to a significant achievement in 2022 when the European Union’s securities markets regulator granted recognition to OCC as a Tier 1 third-country central counterparty. It is a significant milestone in establishing equivalency and recognition between the U.S. and Europe and gives clarity to our clearing members with operations in both jurisdictions. I am proud that OCC’s efforts to enhance our operational and financial resiliency have been recognized in this way.

OCC has strengthened our financial resiliency exponentially over the past few years, and 2022 added more accomplishments to this trend.

Looking Ahead: New Leadership and Continued Stewardship of the Markets

Inside OCC’s walls, in 2022, we welcomed new Chief Executive Officer-Elect Andrej Bolkovic to succeed John P. Davidson, who will retire from the industry in the first half of 2023 after a distinguished 40-year career in financial services. Chief Operating Officer Scot Warren announced his plan to retire in 2023, and Dan Busby, a 23-year veteran of our organization, was named as his successor. In addition, we were pleased to welcome Mike Nowak as our Chief Financial Officer. The outgoing team’s collective contributions and leadership drove significant progress in OCC’s technology, innovation and resilience. In 2023, we look forward to continued momentum from the new team that drives OCC innovation while delivering secure clearing every day as part of the broader financial ecosystem. OCC’s succession plans are important to ensuring that even as people change in roles throughout our organization, we continue to provide industry leading services without interruption.

Our many stakeholders – exchanges, clearing firms, market professionals, regulators and the investing public – expect OCC to deliver at the highest possible level in upholding its mission of serving as the foundation for secure markets. It is a high standard that we share, a role we are proud to play and a serious responsibility that we are honored to be entrusted with and to fulfill.

Craig S. Donohue
Executive Chairman

In 2023, we look forward to continued momentum from the new team that drives OCC innovation while delivering secure clearing every day as part of the broader financial ecosystem.

About OCC

Financial Statements

Year in Review