OCC’s $33.3 million member refund approved
11 March 2015 Chicago
Image: Shutterstock
The US Securities and Exchange Commission (SEC) has approved OCC’s new equity capital plan, which will result in a reduction in clearing fees and a $33.3 million refund for clearing members.
The equity derivatives clearing organisations will increase shareholders’ equity from $25 million, as of the end of 2013, to $247 million. This will be achieved through retaining $72 million of 2014 earnings, and the receipt of $150 million in equity capital contributions from stockholder exchanges.
In addition, the stockholder exchanges have committed to providing up to $117 million in replenishment capital in case of unexpected losses, which will be increased to $200 million as target capital requirement increases.
Initially, this means that the OCC will have ready access to about $364 million in equity capital resources.
The plan is designed to strengthen OCC’s capital base and facilitates its compliance with the proposed SEC regulations applicable to ‘systematically important’ financial market infrastructures.
It also allows OCC to pay a refund of $33.3 million back to its clearing members from 2014’s fees, while also returning to a lower fee schedule. This means that the average clearing fee will drop by 19 percent, compared to current levels.
The alternative would have been an increase in fees, which would in turn have had negative consequences including reduced liquidity and higher costs for investors.
Craig Donohue, executive chairman of OCC, said: "The capital plan represents the culmination of a year-long process to evaluate alternative means for increasing our equity capitalisation."
He added: "Together with our success in building a world class leadership team, and our continued progress in meeting the heightened expectations of our regulators and market participants in terms of our resiliency, OCC will be on a strong footing for the future."
Subject to the completion of all regulatory approval actions, the changes will be effective from 1 April.
The equity derivatives clearing organisations will increase shareholders’ equity from $25 million, as of the end of 2013, to $247 million. This will be achieved through retaining $72 million of 2014 earnings, and the receipt of $150 million in equity capital contributions from stockholder exchanges.
In addition, the stockholder exchanges have committed to providing up to $117 million in replenishment capital in case of unexpected losses, which will be increased to $200 million as target capital requirement increases.
Initially, this means that the OCC will have ready access to about $364 million in equity capital resources.
The plan is designed to strengthen OCC’s capital base and facilitates its compliance with the proposed SEC regulations applicable to ‘systematically important’ financial market infrastructures.
It also allows OCC to pay a refund of $33.3 million back to its clearing members from 2014’s fees, while also returning to a lower fee schedule. This means that the average clearing fee will drop by 19 percent, compared to current levels.
The alternative would have been an increase in fees, which would in turn have had negative consequences including reduced liquidity and higher costs for investors.
Craig Donohue, executive chairman of OCC, said: "The capital plan represents the culmination of a year-long process to evaluate alternative means for increasing our equity capitalisation."
He added: "Together with our success in building a world class leadership team, and our continued progress in meeting the heightened expectations of our regulators and market participants in terms of our resiliency, OCC will be on a strong footing for the future."
Subject to the completion of all regulatory approval actions, the changes will be effective from 1 April.
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