Notice2026-06930
Self-Regulatory Organizations; the Options Clearing Corporation; Order Approving Proposed Rule Change by the Options Clearing Corporation Concerning a Change in Types of Acceptable Collateral and an Update To Mitigate Wrong-Way Risk
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
April 10, 2026
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 91 Issue 69 (Friday, April 10, 2026)</title>
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[Federal Register Volume 91, Number 69 (Friday, April 10, 2026)]
[Notices]
[Pages 18490-18493]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2026-06930]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-105157; File No. SR-OCC-2026-001]
Self-Regulatory Organizations; the Options Clearing Corporation;
Order Approving Proposed Rule Change by the Options Clearing
Corporation Concerning a Change in Types of Acceptable Collateral and
an Update To Mitigate Wrong-Way Risk
April 7, 2026.
I. Introduction
On February 12, 2026, the Options Clearing Corporation (``OCC''),
filed with the Securities and Exchange Commission (``Commission''),
pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Exchange Act'') \1\ and Rule 19b-4 thereunder,\2\ a proposed rule
change regarding collateral eligibility and margin requirements
(hereinafter ``Proposed Rule Change''). The Proposed Rule Change was
published for comment in the Federal Register on February 27, 2026.\3\
The Commission has not received any comments on the Proposed Rule
Change. For the reasons discussed below, the Commission is approving
the Proposed Rule Change.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Exchange Act Release No. 104882 (Feb. 24, 2026), 91 FR
9897 (Feb. 27, 2026) (File No. SR-OCC-2026-001) (``Notice'').
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II. Background
OCC is a central counterparty (``CCP''), which means that, as part
of its function as a clearing agency, it interposes itself as the buyer
to every seller and seller to every buyer for certain financial
transactions. As the CCP for the listed options markets in the United
States,\4\ as well as for certain futures and stock loans, OCC is
exposed to various risks arising from providing
[[Page 18491]]
clearance and settlement services to its Clearing Members.\5\ Because
OCC is obligated to perform on the contracts it clears, one such risk
that OCC is exposed to is credit risk, including the risk that OCC
would not maintain sufficient financial resources to cover exposures if
one of its Clearing Members defaults.
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\4\ OCC describes itself as ``the sole clearing agency for
standardized equity options listed on a national securities exchange
registered with the Commission (`listed options').'' See Exchange
Act Release No. 96533 (Dec. 19, 2022), 87 FR 79015 (Dec. 23, 2022)
(File No. SR-OCC-2022-012).
\5\ Capitalized terms used but not defined herein have the
meanings specified in OCC's Rules and By-Laws, available at <a href="https://www.theocc.com/company-information/documents-and-archives/by-laws-and-rules">https://www.theocc.com/company-information/documents-and-archives/by-laws-and-rules</a>.
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One of the ways OCC manages credit risk is through the collection
of margin collateral from its Clearing Members. To address the risk
that the value of such collateral may be insufficient as the result of
price changes, OCC limits the set of assets it accepts as margin
collateral and applies controls, such as haircuts and concentration
limits, on the collateral it accepts. OCC also addresses credit risk by
applying a margin add-on charge to collateralize risks presented by
cleared positions involving equities and ETNs issued by a Clearing
Member and its affiliates.\6\ As described below, OCC proposes to stop
accepting certain types of collateral and to address specific wrong-way
risk presented by certain Clearing Member positions.\7\ OCC also
proposes a series of organizational and technical changes to its rules
related to collateral.
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\6\ See Exchange Act Release No. 87718 (Dec. 11, 2019), 84 FR
68992, 68993 (Dec. 17, 2019 (File No. SR-OCC-2019-010).
\7\ Specific wrong-way risk arises at a CCP when an exposure to
a participant is highly likely to increase when the creditworthiness
of that participant is deteriorating. Exchange Act Release No. 78961
(Sept. 28, 2016), 81 FR 70786, 70816 n.317 (Oct. 13, 2016) (S7-03-
14).
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A. Discontinuance of Certain Collateral Types
Currently, OCC's rules provide for various types of assets as
margin collateral,\8\ including letters of credit,\9\ or guarantees of
payment from a bank, and government-sponsored entity (GSE) debt
securities.\10\ However, on December 19, 2024, OCC announced its
determination to disallow letters of credit and GSE debt securities as
acceptable collateral.\11\ OCC states that no Clearing Member has
pledged GSE debt securities as margin collateral since July 11, 2023,
and that no letters of credit remain on deposit.\12\
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\8\ See OCC Rule 604.
\9\ See OCC Rule 604(c) (allowing Clearing Members to deposit
letters of credit denominated in U.S. dollars issued by banks or
trust companies approved by OCC). OCC also accepts margin collateral
in the form of cash, government securities, money market fund
shares, and common stock. See OCC Rule 604.
\10\ See OCC Rule 604(b)(2). OCC's By-Laws define ``GSE debt
securities'' to mean such debt securities issued by Congressionally
chartered corporations as the Risk Committee may from time to time
approve for deposit as margin. OCC By-Laws, Article I, Section 1, G.
\11\ See Notice, 91 FR at 9898. See also, OCC Information Memo
#55740 (Dec. 19, 2024), available at <a href="https://infomemo.theocc.com/infomemos?number=55740">https://infomemo.theocc.com/infomemos?number=55740</a>.
\12\ See Notice, 91 FR at 9898.
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To maintain the ability to accept letters of credit and GSE debt
securities, consistent with OCC's current rules, would require OCC and
its Clearing Members to test the functionality to support these
collateral types in the new clearance and settlement system,
Ovation.\13\ Further, OCC asserts it would incur additional costs
associated with ongoing risk monitoring and reviews of its procedures
to support the acceptance of letters of credit and GSE debt
securities.\14\ As a result, OCC proposes to change its rules to no
longer allow Clearing Members to post letters of credit and GSE debt
securities as margin collateral.\15\
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\13\ See id.
\14\ See id.
\15\ Such changes will affect OCC's By-Laws, Rules, Collateral
Risk Management Policy, Default Management Policy, Liquidity Risk
Management Framework, and Recovery and Wind-Down Plan.
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B. Specific Wrong-Way Risk
As noted above, OCC proposes changes designed to address specific
wrong-way risk presented by certain Clearing Member positions.
Currently, OCC manages wrong-way risk in collateral, in part, by
disapproving common stock as margin collateral for a Clearing Member
where such stock is issued by the Clearing Member or its affiliate
except where the common stock serves as a hedge to the Clearing
Member's positions.\16\ OCC also applies a margin add-on charge
designed to account for specific wrong-way risk (the ``SWWR Add-on'')
in a Clearing Member's positions in cleared contracts.\17\ OCC proposes
to extend the SWWR Add-on to cover Clearing Member positions in
exchange traded products (ETPs) that hold spot cryptocurrency for which
the Clearing Member or its affiliate serves as the custodian of the
fund's cryptocurrency holdings.\18\ OCC believes that extending the
SWWR Add-on to spot cryptocurrency ETPs when the Clearing Member is
affiliated with the custodian of such ETP is appropriate given the
unique custody risks associated with cryptocurrencies.\19\ As of the
time of filing, OCC represented that only one Clearing Member has an
affiliate that is a custodian for a spot cryptocurrency ETP.\20\
Further, OCC currently limits Clearing Members' ability to pledge such
ETPs as margin collateral to the amount that is risk reducing for
activity in cleared positions.\21\
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\16\ See Interpretation and Policy .16 to OCC Rule 604.
\17\ See Notice, 91 FR at 9899 n.17.
\18\ OCC proposes to amend its Margin Policy to effectuate the
proposed extension of the SWWR Add-on.
\19\ See Notice, 91 FR at 9899. OCC gave the example of
cybersecurity-related theft of the cryptocurrency leading to a
decline in the value of the ETP at the same time that the Clearing
Member may default on obligations to OCC. Id.
\20\ Id.
\21\ See Notice, 91 FR at 9899 n.21. OCC did not propose a
change in collateral eligibility related to spot cryptocurrency
ETPs.
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C. Reorganization and Technical Changes
Separate from the substantive changes described above, OCC proposes
to reorganize its current Rule 604 and to making conforming edits as
needed to its Rules to facilitate such reorganization. Specifically,
OCC Rule 604 would be replaced by three separate rules addressing: (i)
the form of collateral OCC accepts (proposed Rule 604A); (ii) how OCC
holds and invests collateral (proposed Rule 604B); and (iii) how OCC
values the collateral, respectively (proposed Rule 604C). OCC proposes
to further reorganize its rules by incorporating the current
interpretations and policies attached to OCC Rule 604 directly into the
text of the rule. For example, I&P .07 to OCC Rule 604, which requires
assets deposited as collateral with OCC to be free of liens and other
encumbrances, would become proposed Rule 604B(b)(1)(B), but otherwise
remain virtually intact. Further, OCC proposes other ministerial
changes to its Rule 604 and related rules, including breaking up long
paragraphs and adding headings,\22\ renumbering cross-references,\23\
and removing unnecessary or inaccurate language.\24\
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\22\ For example, OCC proposes to divide certain provisions of
current OCC Rule 604(b)(i) (pertaining to equity issues) into
subsections of proposed Rule 604A(b)(2). See Notice, 91 FR at 9900.
\23\ For example, the reference in OCC Rule 705 to OCC Rule
604(b)(3) would be replaced with a reference to proposed OCC Rule
604A(b)(2). See Notice, 91 FR at 9902.
\24\ For example, OCC proposes to remove references to OCC Rule
610T throughout OCC's rules as unnecessary because Rule 610T was
removed from OCC's rules following a transitional period to the
current escrow deposit program. See Notice, 91 FR at 9902; see also
Exchange Act Release No. 78675 (Aug. 25, 2016), 81 FR 60099, 60105
(Aug. 31, 2016) (File No. SR-OCC-2016-009).
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III. Discussion and Commission Findings
Section 19(b)(2)(C) of the Exchange Act requires the Commission to
approve
[[Page 18492]]
a proposed rule change of a self-regulatory organization if it finds
that the proposed rule change is consistent with the requirements of
the Exchange Act and the rules and regulations thereunder applicable to
the organization.\25\ Under the Commission's Rules of Practice, the
``burden to demonstrate that a proposed rule change is consistent with
the Exchange Act and the rules and regulations issued thereunder . . .
is on the self-regulatory organization [`SRO'] that proposed the rule
change.'' \26\
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\25\ 15 U.S.C. 78s(b)(2)(C).
\26\ Rule 700(b)(3), Commission Rules of Practice, 17 CFR
201.700(b)(3).
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The description of a proposed rule change, its purpose and
operation, its effect, and a legal analysis of its consistency with
applicable requirements, must all be sufficiently detailed and specific
to support an affirmative Commission finding,\27\ and any failure of an
SRO to provide this information may result in the Commission not having
a sufficient basis to make an affirmative finding that a proposed rule
change is consistent with the Exchange Act and the applicable rules and
regulations.\28\ Moreover, ``unquestioning reliance'' on an SRO's
representations in a proposed rule change is not sufficient to justify
Commission approval of a proposed rule change.\29\
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\27\ Id.
\28\ Id.
\29\ Susquehanna Int'l Group, LLP v. Securities and Exchange
Commission, 866 F.3d 442, 447 (D.C. Cir. 2017).
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After carefully considering the Proposed Rule Change, the
Commission finds that the Proposed Rule Change is consistent with the
requirements of the Exchange Act and the rules and regulations
thereunder applicable to OCC. More specifically, for the reasons given
below, the Commission finds that the Proposed Rule Change is consistent
with Section 17A(b)(3)(F) of the Exchange Act,\30\ and Rules 17ad-
22(e)(5), 17ad-22(e)(6), and 17ad-22(e)(21) thereunder, as described in
detail below.\31\
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\30\ 15 U.S.C. 78q-1(b)(3)(F).
\31\ 17 CFR 240.17ad-22(e)(5), (e)(6), and (e)(21).
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A. Consistency With Section 17A(b)(3)(F) of the Exchange Act
Section 17A(b)(3)(F) of the Exchange Act \32\ requires, among other
things, that the rules of a clearing agency be designed to promote the
prompt and accurate clearance and settlement of securities transactions
and, to the extent applicable, derivative agreements, contracts, and
transactions and to assure the safeguarding of securities and funds
which are in the custody or control of the clearing or agency or for
which it is responsible.
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\32\ 15 U.S.C. 78q-1(b)(3)(F).
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Disallowing certain types of margin collateral, namely GSE debt
securities and letters of credit, would reduce the cost and complexity
related to both OCC's new clearance and settlement systems and to OCC's
monitoring of risks related to such collateral types. As noted above,
Clearing Members have not pledged GSE debt securities since 2023 and
are not currently pledging letters of credit as margin collateral. As a
result, the proposed change in collateral eligibility will reduce
operational costs and complexity without affecting current collateral
contributions. Reducing operational costs and complexity in this way
improves efficiency at OCC, which is consistent with the promotion of
prompt and accurate clearance and settlement.
Separately, OCC's proposal to extend the SWWR Add-on will increase
the margin collateral collected from a Clearing Member with positions
in spot cryptocurrency ETPs for which the Clearing Member or its
affiliates serves as the custodian. Collecting margin to recognize the
potential loss in value of the ETP concurrent with a Clearing Member
default would increase the likelihood that OCC would hold sufficient
margin collateral to address the default without resorting to loss
mutualization through the use of non-defaulting Clearing Members'
contributions to the Clearing Fund. Because it reduces the likelihood
of loss mutualization, the Proposed Rule Change is consistent with the
safeguarding of securities and funds which are in OCC's custody or
control.
Accordingly, the Commission believes that the Proposed Rule Change
is consistent with the requirements of Section 17A(b)(3)(F) of the
Exchange Act.\33\
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\33\ 15 U.S.C. 78q-1(b)(3)(F).
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B. Consistency With Rule 17ad-22(e)(5) Under the Exchange Act
Rule 17ad-22(e)(5) under the Exchange Act requires, in part, that a
covered clearing agency establish, implement, maintain and enforce
written policies and procedures reasonably designed to limit the assets
it accepts as collateral to those with low credit, liquidity, and
market risks.\34\ As described above, OCC proposes to amend its rules
to disallow the posting of GSE debt securities and letters of credit as
margin collateral. The removal of these two types of collateral does
not affect the credit, liquidity, or market risk associated with the
collateral that OCC will continue to accept as margin (e.g., cash,
government securities, money market fund shares, and common stock).
Accordingly, the Commission believes that disallowing GSE debt
securities and letters of credit as margin collateral is consistent
with the requirements of Rule 17ad-22(e)(5).\35\
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\34\ 17 CFR 240.17ad-22(e)(5).
\35\ 17 CFR 240.17ad-22(e)(5).
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C. Consistency With Rule 17ad-22(e)(6) Under the Exchange Act
Rule 17ad-22(e)(6)(i) under the Exchange Act requires that a
covered clearing agency establish, implement, maintain and enforce
written policies and procedures reasonably designed to cover, if the
covered clearing agency provides central counterparty services, its
credit exposure to participants by establishing a risk-based margin
system that, at a minimum considers, and produces margin levels
commensurate with, the risks and particular attributes of each relevant
product, portfolio, and market.\36\
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\36\ 17 CFR 240.17ad-22(e)(6)(i).
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As described above, OCC proposes to extend the application of its
SWWR Add-on. Specifically, OCC proposes to cover Clearing Member
positions in spot cryptocurrency ETPs for which the Clearing Member or
its affiliate serves as the custodian of the fund's cryptocurrency
holdings. OCC's prior adoption of the SWWR Add-on was consistent with
Rule 17Ad-22(e)(6)(i) under the Exchange Act.\37\ The SWWR Add-on is
designed to produce margin levels commensurate with the particular
attributes of certain products in terms of the likely recovery
available in the event of a default by the issuing Clearing Member.\38\
Similarly, the default of a Clearing Member may affect the value of a
spot cryptocurrency ETP positions where that member is also the fund's
custodian. The proposed change will extend the protection provided to
OCC by the SWWR Add-on to address a potential loss in value of a
Clearing Member's spot cryptocurrency ETP positions, at the time of
default, related to the member's (or its affiliate's) role as when that
member as the fund's custodian; which would be consistent with OCC's
existing limitations on Clearing Members posting such assets as margin
collateral.
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\37\ See Exchange Act Release No. 87718 (Dec. 11, 2019), 84 FR
68992, 68995 (Dec. 17, 2019) (File No. SR-OCC-2019-010).
\38\ Id.
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Accordingly, and for the reasons stated above, the Commission
believes the extension of the SWWR Add-on designed to cover specific
wrong-way
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risk arising out of a Clearing Member's relationship to a particular
underlying product is consistent with Rule 17ad-22(e)(6)(i) under the
Exchange Act.\39\
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\39\ 17 CFR 240.17ad-22(e)(6)(i).
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D. Consistency With Rule 17ad-22(e)(21) Under the Exchange Act
Rule 17ad-22(e)(21) under the Exchange Act requires that a covered
clearing agency establish, implement, maintain and enforce written
policies and procedures reasonably designed to be efficient and
effective in meeting the requirements of its participants and the
markets it serves.\40\ As described above, OCC proposes to disallow GSE
debt securities and letters of credit as margin collateral because
continuing to accept such collateral carries with it certain costs and
complexity. Disallowing such collateral types would reduce the testing
required of OCC and its Clearing Members for Ovation. Further, the
proposed change will not negatively affect the current set of margin
collateral that OCC holds based on OCC's representations that no
Clearing Member has pledged GSE debt securities since July 11, 2023,
and that no letters of credit remain on deposit. As a result, the
proposed change would reduce inefficiency without reducing the
effectiveness of Clearing Member collateral currently posted to OCC.
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\40\ 17 CFR 240.17ad-22(e)(21).
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Further, as described above, OCC proposes a number of non-
substantive changes to reorganize its margin rules such as
consolidating the provisions of Rule 604 and related interpretations
and policies and dividing lengthy provisions into subsections with
headers. Such changes the non-substantive re-organization and
consolidation helps to improve the readability, and, thus, the
efficiency and effectiveness of OCC's rules. Relatedly, OCC proposes a
number of non-substantive corrections, such as updating cross-
references and removing inaccurate or unnecessary language, which will
also improve the readability of OCC's margin rules.
Accordingly, and for the reasons stated above, the Commission
believes the removal of GSE debt and letters of credit as acceptable
margin collateral is consistent with Rule 17ad-22(e)(21) under the
Exchange Act.\41\
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\41\ 17 CFR 240.17ad-22(e)(21).
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IV. Conclusion
On the basis of the foregoing, the Commission finds that the
Proposed Rule Change is consistent with the requirements of the
Exchange Act, and in particular, with the requirements of with Section
17A(b)(3)(F) of the Exchange Act,\42\ and Rules 17ad-22(e)(5), 17ad-
22(e)(6), and 17ad-22(e)(21) thereunder.\43\
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\42\ 15 U.S.C. 78q-1(b)(3)(F).
\43\ 17 CFR 240.17ad-22(e)(5), (e)(6), and (e)(21).
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It is therefore ordered pursuant to Section 19(b)(2) of the
Exchange Act \44\ that the proposed rule change (SR-OCC-2026-001) be,
and hereby is, approved.\45\
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\44\ 15 U.S.C. 78s(b)(2).
\45\ In approving the proposed rule change, the Commission
considered the proposal's impact on efficiency, competition, and
capital formation. 15 U.S.C. 78c(f).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\46\
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\46\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2026-06930 Filed 4-9-26; 8:45 am]
BILLING CODE 8011-01-P
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