A thread on an under-the-radar but critical part of the plumbing of markets: the Options Clearing Corporation, or OCC:pic.twitter.com/H8tntwpq6q
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OCC has an interesting ownership structure. The company is under the jurisdiction of the SEC and the CFTC, is supervised by a board of its key customers, and is owned by the top 3 equity exchanges; CBOE owns 20%, and ICE & Nasdaq each own 40%.
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In 2019, OCC made $127M in net profit. The company is required to keep enough capital on its balance sheet to fund operations and satisfy the SEC, but it does pay dividends to its owners when allowed. For example, OCC paid ICE $31M in dividends from 2015-2017:pic.twitter.com/rBTWSj2yNN
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OCC's board is a who's-who of financial services - all of the below companies have some representation on OCC's board, either as current employees or past company leaders:pic.twitter.com/gYJ6x9f3Qp
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While CME is not a direct customer of OCC and has no ownership, a huge percentage of OCC's executives are former CME leaders. OCC's Chairman, CEO, COO, CIO, head of risk, government relations, compliance, and audit all have had prior stints with CME.
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This makes a bit more sense when considering where OCC is located - it’s a 4 minute walk from CME's headquarters to OCC's:pic.twitter.com/Yspl5sUqZ6
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OCC is a great example of the characteristics of exchanges. - highly regulated - relatively unknown - a critical part of our markets - created by exchanges, for exchanges - connections to every bank & exchange on the Street
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Sources: https://annualreport.theocc.com/getmedia/43551335-e2ef-44ea-92ea-ceeaa7fd3e62/OCC-2019-AnnualReport.pdf …; https://www.sec.gov/Archives/edgar/data/1120193/000112019319000002/ndaq1231201810-k.htm … https://www.sec.gov/ix?doc=/Archives/edgar/data/1571949/000157194920000003/ice2019123110k.htm … https://www.sec.gov/ix?doc=/Archives/edgar/data/1374310/000155837020001127/cboe-20191231x10k3d7487.htm …
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