Delivering Strengthened Operations and Risk Management
OCC continues to meet the growth of the U.S. listed options industry while we move forward with our transformation. Developing our new clearing platform Ovation, which is planned for a 2025 launch, is a significant program in both time and expense, but we made considerable advancements in 2022. At the same time, we made significant investments in our current operations and the legacy ENCORE clearing system. Highlights include:
Expanding Use of Cloud Computing
The financial services industry’s migration to the Cloud continues to be transformational in enhancing business agility, operational efficiency and risk management.
Late last year, the Securities and Exchange Commission (SEC) issued a ‘Notice of No Objection’, regarding OCC’s Advance Notice filing in connection with our Cloud infrastructure proposal. This decision represents the culmination of several years of collaborative work with our regulators and clears the path for OCC to utilize the resiliency, security and capacity benefits of the Cloud for our critical services when we launch Ovation.
It is vital that our critical systems remain continuously available to the U.S. listed options and futures markets that we serve. For this reason, OCC is also building an on-premises data center for the new Ovation platform in the unlikely event of a widespread, multi-region Cloud service disruption.
Present Day Resilience: Investing in and Upgrading ENCORE
Our current ENCORE clearing system has been continuously developed and upgraded over the last 20 years and has served the marketplace well. We regularly assess our infrastructure and applications to ensure that they are able to support future volume projections. While we work toward Ovation’s launch, OCC continues to make investments to ensure ENCORE remains robust and resilient and is prepared to process further industry growth. We are confident OCC will deliver our services safely and reliably now and continuously through the 2025 launch of Ovation, which will bring flexibility features to match our resiliency.
On February 16, 2023, OCC announced settlements with the U.S. Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) regarding OCC’s error concerning the implementation of its rule on Liquidation Cost Model Enhancements and its Liquidation Cost Charge. OCC self-identified the issue in 2021, cooperated with the SEC and CFTC investigations, and have undertaken remedial efforts to address the underlying issues. Moving forward, we are confident that if a similar error occurred, it would be swiftly detected and addressed. Although we sincerely regret the error, the broad remediation work we have undertaken in the wake of its discovery has further strengthened OCC’s resiliency.
Future Resilience and Flexibility: Renaissance Initiative Testing and Transition
The changing needs of our exchange partners and market participants called for a new clearing platform that will give us more flexibility to respond to a diverse set of risks and to be able to process and accommodate new industry offerings. Ovation will provide our members and market participants with near real-time clearing, settlement and risk management capabilities, while also preserving OCC’s secure, efficient and reliable operations.
In responding to evolving market needs, OCC has taken a methodical, resiliency-first mindset in our approach to executing Ovation. Through continuous and careful testing and training we will ensure that Ovation is ready to serve and meet the standards of the industry we support. We are confident that we can deliver our innovative platform and know that it will provide welcome enhancements and capabilities to the markets we serve.