As the Dow plummeted this week, trade volumes experienced a sharp rise.
The jump in activity has brought record-setting days for The Options Clearing Corporation, which operates using a decentralized structure with equally-capable offices in Dallas and Chicago.
On average the world’s largest equity derivatives clearing organization processes about 17 million contracts a day from its 15 options exchanges and three futures exchanges.
On Tuesday, the company had a top 5 day clearing and settling 40 million contracts.
This week, it’s doubled that daily volume or more. On Tuesday, the 45-year-old company had a top 5 day clearing and settling 40 million contracts.
Keeping operations running smoothly especially in volatile market conditions is a testament to the company’s commitment to stability, said Mike Hansen, OCC’s vice president of national operations.
“The expectation is it doesn’t matter what the volume is — if it’s high or low — we are doing this repeatable process every night and they know that OCC is going to produce the reports, the risk management, [and] everything they expect to see regardless of market conditions,” said Hansen, who works out of OCC’s Cypress Waters office in Dallas.
OCC BECOMES FIRST TO CLEAR BITCOIN FUTURES
Going through the proper methodical processes are vital whether it’s intaking contracts from an existing product or clearing new ones from a cryptocurrency like bitcoin.
“We are pretty intense and anal about all this stuff. People think and then they think again. All of that happened for bitcoin,” said Adi Agrawal, OCC’s chief transformation officer.
In December, OCC became the first U.S. clearing organization to clear bitcoin futures after Chicago-based Cboe Global Markets requested to begin trading the cryptocurrency as a cash-settled futures product.
“It’s been good for a new product, but a lot of people are waiting, dipping their toe in the water to see where things go.”
The cash-settled feature, meaning it’s backed by cash instead of the underlying asset, aligned bitcoin with other futures products OCC had already been clearing, but that didn’t mean it went through any less due diligence.
As a federally designated “systematically important financial market utility,” OCC has a multitude of oversight including its front line regulators, the Securities and Exchange Commission and Commodity Futures Trading Commission.
“If someone comes up with a product that can put either our ecosystem or the larger market at risk, that cannot be managed appropriately, we would be obliged not to launch it,” Agrawal said.
Since trading opened Dec. 10 for bitcoin futures on the Cboe Futures Exchange, OCC has cleared about a half a million contracts.
“The volume hasn’t been explosive,” Hansen said. “It’s been good for a new product, but a lot of people are waiting, dipping their toe in the water to see where things go.”
IN FOUR YEARS, OCC HAS DOUBLED IN SIZE
Growth within OCC on the other hand has been quite rapid. In the last four years, the organization has doubled in size.
Between Chicago and Dallas, OCC employs nearly 750 people. A few hundred of those new hires have started in the last 18-24 months.
The uptick, Hansen said, has been prompted by the increasing contract volumes OCC must clear as well as the passage of Dodd–Frank Wall Street Reform and Consumer Protection Act in 2010, which established OCC as a “systematically important financial market utility.”
“Our designation as a SIFMU has led to increased regulatory insight into our organization, so we’ve had to add a lot of new groups that didn’t exist prior to our designation,” Hansen said.
OCC is run as one firm with fully-operational teams in both Dallas and Chicago. That way if something catastrophic happens, it doesn’t hinder its ability to process contracts.
Like many financial institutions, OCC was prompted to diversify geographically after the 9/11.
“If what occured in lower Manhattan happened in the Chicago loop, we as an organization might have had to cease operations which would bring the system to a halt in terms of listed derivatives,” Hansen said.
OCC FINDS TALENT, GEOGRAPHIC DIVERSITY IN DFW
OCC found its alternate site in Keller where it set up shop in 2003 with a skeleton crew. Fifteen years later, its North Texas presence has blossomed to nearly 200 employees. Last July, it relocated from Keller to the burgeoning Cypress Waters development in Dallas.
“The talent profile in the area has changed a lot over the years.”
The access to infrastructure and most importantly talent diversity have kept OCC rooted in Dallas-Fort Worth, Agrawal said.
“The talent profile in the area has changed a lot over the years,” he said. “Now, you have a critical mass of large firms who create, use, and build the kind of talent that we are interested in as well.”
Being centrally located in DFW has made a world of difference in recruiting, Hansen said. Plus, the new, modern space lends itself to more collaboration, an office model that will soon be replicated in Chicago.
“For us it’s been very positive in terms of how people interact with the space and with each other,” Agrawal said.
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