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Options Clearing Corp. Proposes Procedures to Adjust Margin During Periods of High Volatility

The Options Clearing Corporation ("OCC") proposed amendments to formalize the procedures under which it would adjust the parameters for calculating margin requirements during periods of high market volatility.

The proposed increased margin requirements would apply to equity options and to certain stock loan and futures transactions. The amendments (i) address internal OCC processes and (ii) require the discretion of OCC’s Model Risk Working Group ("MRWG") and Financial Risk Management ("FRM") officers in determining and reverting from high volatility control settings.

The proposal includes:

  • The adoption of regular and high volatility control settings in the OCC proprietary "System for Theoretical Analysis and Numerical Simulation" ("STANS") methodology that runs various models used to calculate each clearing member's margin requirements, with annual reviews and adjustments as necessary;
  • The establishment of thresholds and procedures for monitoring market volatility and idiosyncratic price moves, requiring escalation to appropriate decisionmakers like the MRWG and FRM officers; and
  • Empowering FRM officers to implement or revert from high volatility control settings under specific conditions.

Comments on the proposal are due by February 15, 2024.

Primary Sources

  1. Federal Register OCC: Notice of Filing of Proposed Rule Change by The Options Clearing Corporation Concerning Its Process for Adjusting Certain Parameters in Its Proprietary System for Calculating Margin Requirements During Periods When the Products It Cl

Tags

Regulated Activities
Margining
Regulated Entities
Markets
Sub-Entity
Clearing Organizations
Body of Law
Securities Law
Jurisdiction
US - Federal
Organization
FINRA / MSRB / SEC Exchanges / SIPC / Accountants
Sub-Author
Options Clearing Corp.