OCC-2021-013 | Equity Recovery / Operational Loss - YouTube

on everyone charlie here we have a rule  filing to talk about out of the occ  

options clearing corporation this is uh occ2021013  

and it relates to their operational loss fee  let's go and take a look at what this is all about

so this is from the sac filed um immediately  this is a proposal change to update the options  

clearing corporation's operational loss fee  pursuant to its capital management policy  

so the clearing agency's statement on the  terms of substance of the proposed rule change  

um it's basically going to revise occ's schedule  of fees effective january 1st to update the  

maximum contingent operational loss fee listed in  occ schedule fees in accordance with occ's capital  

management policy now the purpose of this is to  again revise their schedule of fees effective  

january 1st to update the maximum aggregate  operational loss fee the occ would charge clearing  

members in equal shares in the unlikely event  that occ shareholders equity falls below certain  

thresholds defined in occ's capital management  policy the proposed fee change is designed to  

enable occ to replenish capital to comply with  rule 17 ad-22e15 under the exchange act which  

requires occ in pertinent part to hold liquid net  assets funded by equity to the greater of either  

six months current operating expenses or the net  amount determined by the board of directors to be  

sufficient enough to ensure a recovery or orderly  wind down of critical operations and services  

and maintain a viable plan approved by the  board of directors and updated at least  

annually for raising additional equity should its  equity fall close to or below the amount required  

so we're getting all these capital requirements  risk protocols tweaked here at the end of the year  

now based on the board approved target capital  requirement for 2022 268 million is the target  

a trigger event would occur if occ's equity less  the minimum corporate contribution falls below  

241.2 million at any time or below 268 million  for a period of 90 consecutive calendar days  

occ calculates the maximum aggregate  operational loss fee based on the amount  

determined by the board to be sufficient  for a recovery or orderly wind down  

of the critical operations and services or  rwd amount which is determined based on the  

assumptions in occ's recovery and orderly  wind down plan that we saw earlier this year

so this proposed rule change would revise the  maximum operational loss fee to reflect the  

adjusted rwd amount based on occ's 2022 budget  16 as 16 shouldn't be there that's a super note  

based on their 22 budget as  follows so the current fee schedule

143.66 million less the aggregate amount of  operational loss fee previously charged and  

not refunded as the date calculated divided by  the number of clearing members at the time charge  

the proposed fee schedule would be instead of  143 million increases it to 157 million flat  

less the aggregate amount of operational  velocities previously charged and not refunded  

as the date calculated divided by the number  of clearing members at the time charge  

so in essence occ believes that this proposed rule  and this proposed fee change is reasonable because  

it is designed to replenish occ's equity in the  form of liquid net assets in the event that occ's  

equity less the minimum corporate contribution  reserved as the primary portion of occ's minimum  

persistent skin in the game another filing we  saw at the beginning of this year falls close  

to or below its target capital requirement so  that occ can continue to meet its obligations  

as a systematically important financial market  utility otherwise known as an sifmu or sifmu  

to clearing members and the general public  should an operational loss materialize  

including through a recovery or orderly wind  down of critical operations and services  

this filing was littered with typos so i don't  know if they rushed through this one but there was  

quite a bit of typos in this one so yeah anyways  basically they're trying to replenish their equity  

in the form of liquid net assets in the event  of an operational loss from some kind of event  

now those of you that keep  saying rules are impatient or  

rules don't work they wouldn't be written if  they didn't or weren't designed to operate now  

again this filing here ties in two previous  occ filings that we saw now keep in mind  

the same thing isn't going to occur with the nscc  what are we waiting on the sft what did it just  

come out oh 16 what is sft tying together with  a lot of shit so just be patient just be patient