Options Clearing Corporation (OCC)
What it is:
How it works (Example):
The OCC confirms, certifies and clears contract trades. It also acts as a market maker and trading specialist for a variety of options contracts.
The OCC operates under the jurisdiction of both the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC). Under its SEC jurisdiction, OCC clears transactions for put and call options on stocks, stock indexes, foreign currencies and interest rates. As a registered Derivatives Clearing Organization (DCO) under CFTC jurisdiction, OCC clears and settles transactions involving futures and futures options.
Why it Matters:
As a guarantor of securities contract trades, the OCC ensures that the obligations of the contracts they clear are fulfilled. By guaranteeing that transactions take place as promised, the OCC (and other clearinghouses) ensure markets operate in an efficient and orderly fashion.