SEC lifts OCC capital stay
14 September 2015 Chicago
Image: Shutterstock
The US Securities and Exchange Commission (SEC) has lifted a temporary stay of OCC’s proposed capital plan amid a challenge from options competitors.
Under its order to discontinue the stay, which was issued on 10 September, the SEC determined that “strengthening the capitalisation of a systemically important clearing agency, such as OCC, is a compelling public interest”.
OCC received approval for its capital plan earlier this year. Under the plan, the exchange will increase shareholders’ equity from $25 million to $247 million.
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 its target capital requirement increases.
Initially, this means that the OCC will have access to about $364 million in equity capital resources.
The plan 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 19 percent, compared to current levels.
BATS Global Markets, BOX Options Exchange, KCG Holdings, Miami International Securities Exchange and Susquehanna International Group subsequently filed petitions contesting approval of the capital plan, citing policy and competition concerns.
The petitions triggered an automatic stay of the approval, which OCC disputed in April.
The SEC has finally responded to OCC’s motion to lift the stay, while simultaneously granting the petitions to review approval of the capital plan.
“Under the circumstances of this case, the commission believes, on balance, that strengthening the capitalisation of a systemically important clearing agency, such as OCC, is a compelling public interest,” ruled the SEC.
“The commission also believes that the concerns raised by the petitioners regarding potential monetary and competitive harm do not currently justify maintaining the stay during the pendency of the commission’s review. Nor does the commission believe that lifting the stay precludes meaningful review of the approval order.”
Craig Donohue, executive chairman of OCC, commented: “We are pleased that the SEC agreed with OCC that the concerns raised by petitioners do not justify maintaining the stay during the pendency of the commission’s review.”
“The SEC’s action permits us to further strengthen our equity capital resources so that a compelling public interest can be served. The plan will strengthen our capital base from a business perspective, enable our firm to meet the heightened capital requirements that are critical for systemically important financial market utilities like OCC, and better position us to meet international requirements so that market participants are not subject to the costs of punitive capital requirements imposed by international regulators.”
Under its order to discontinue the stay, which was issued on 10 September, the SEC determined that “strengthening the capitalisation of a systemically important clearing agency, such as OCC, is a compelling public interest”.
OCC received approval for its capital plan earlier this year. Under the plan, the exchange will increase shareholders’ equity from $25 million to $247 million.
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 its target capital requirement increases.
Initially, this means that the OCC will have access to about $364 million in equity capital resources.
The plan 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 19 percent, compared to current levels.
BATS Global Markets, BOX Options Exchange, KCG Holdings, Miami International Securities Exchange and Susquehanna International Group subsequently filed petitions contesting approval of the capital plan, citing policy and competition concerns.
The petitions triggered an automatic stay of the approval, which OCC disputed in April.
The SEC has finally responded to OCC’s motion to lift the stay, while simultaneously granting the petitions to review approval of the capital plan.
“Under the circumstances of this case, the commission believes, on balance, that strengthening the capitalisation of a systemically important clearing agency, such as OCC, is a compelling public interest,” ruled the SEC.
“The commission also believes that the concerns raised by the petitioners regarding potential monetary and competitive harm do not currently justify maintaining the stay during the pendency of the commission’s review. Nor does the commission believe that lifting the stay precludes meaningful review of the approval order.”
Craig Donohue, executive chairman of OCC, commented: “We are pleased that the SEC agreed with OCC that the concerns raised by petitioners do not justify maintaining the stay during the pendency of the commission’s review.”
“The SEC’s action permits us to further strengthen our equity capital resources so that a compelling public interest can be served. The plan will strengthen our capital base from a business perspective, enable our firm to meet the heightened capital requirements that are critical for systemically important financial market utilities like OCC, and better position us to meet international requirements so that market participants are not subject to the costs of punitive capital requirements imposed by international regulators.”
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