Requirements
- Applicant must be a broker dealer or FCM registered with the SEC or CFTC, or a non-U.S. securities firm.
- Applicant must meet minimum net capital requirements (initial requirement is a minimum of $2,500,000 or as determined by OCC's Board of Directors).
- Applicant must have qualified staff and adequate facilities to self-clear options and interface with OCC and other Clearing Members (or contract for a facilities management arrangement).
Documentation
- OCC Membership Application
- FOCUS Report
- Audited Financial Statements
- The Findings of Securities and Commodities Regulators
- $4,000 Non-refundable Qualification Fee
- Brief Resumes of Staff Responsible for P&S, Positions Reconciliation and Margin
Site Visit
A Pre-membership Examination is conducted by representatives from OCC's Regulation Department. The session consists of an examination of the firm's books and records and interviews with the firm's principals and compliance staff.
An Operations Orientation is conducted by representatives of OCC's Membership/Operations Services area. The meeting addresses OCC procedures, time frames, reports, input forms, exercise and assignment, Ex-by-Ex procedures, OCC financial and operational services and general OCC information. Specifics of different option products are also reviewed.
Approval
The Applicant's designated examining authority (DEA) is contacted for pertinent information relative to the firm's request for membership with OCC.
The findings of OCC staff from the meetings noted above and the comments from the DEA are submitted to OCC's Membership Committee (which is comprised of members of OCC's Board of Directors) and then to OCC's Board of Directors for membership approval. The Board meets quarterly, so the membership application process may take up to twelve weeks after receipt of a completed membership application.
Post Approval / Pre Start Up
Clearing Fund
Once approved, and prior to start-up, the applicant must deposit its clearing fund in cash or U.S. government securities. The minimum clearing fund requirement is $150,000 or such determined by the Board of Directors. The requirement is recalculated monthly based on the firm's proportionate share of 5% to 7% of the preceding month's average daily aggregate margin requirement providing that the clearing fund's total size is $1 billion. The requirement is the greater of the minimum or the formula calculation.
Settlement Account
The Clearing Member must have indicated its settlement account number at an OCC approved Settlement Bank and completed the Authorization to Draft Bank Account document.
Clearing Member GUI
The Clearing Member must interface with OCC via MyOCC and ENCORE™. ENCORE is an on-line clearing system used for daily post-trade and expiration input, report inquiry, on-site report printing and the viewing/printing of OCC and participant Exchange Information Memos. ENCORE training will be provided at the Clearing Member location.
Further Information
The Clearing Member must be prepared for settlement the morning after the first day of option clearance. Settlement includes premium pay or collect (dollars owed for premium are always a cash draft) and margin. OCC accepts margin collateral in the form of cash, Letters of Credit, U.S. Government securities and valued securities. The above information is a summary only. Applicants are directed to OCC's By-Laws and Rules for exact requirements and corresponding interpretations.