Wall Street Preps for Binary Bets: OCC Overhauls Risk Rules
Published Date: 4/15/2026
Notice
Summary
The Options Clearing Corporation (OCC) wants to update its risk system so it can handle binary options safely. This change means OCC can start clearing these new types of options while keeping risks in check. Traders and firms dealing with binary options should watch for this update, which could affect how their trades are processed and managed soon.
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Analyzed Economic Effects
4 provisions identified: 3 benefits, 1 costs, 0 mixed.
OCC Will Start Clearing Binary Options
OCC has proposed to accept and clear European-style binary options, initially on equity indexes. OCC filed the proposal on April 8, 2026 and says it will only clear binary options that qualify as a “security” as determined by the Commission.
Binary Options Will Be Margined Under STANS
OCC will incorporate binary options into its STANS margin system so margin requirements for binary positions are calculated at the portfolio level. STANS uses a base component equal to a 99% expected shortfall over a two-day time horizon to estimate margin.
How OCC Will Price Binary Options
OCC proposes to price binary options using a Black–Scholes closed-form pricer with the forward price and the implied volatility of the corresponding vanilla option plus an adjustment term to align with market prices. Initially OCC will proxy implied volatility from vanilla options and may move to using bid/ask-derived implied volatilities as liquidity improves.
OCC’s Changes Aim to Protect Investors
OCC says the STANS updates are designed to ensure it has sufficient financial resources to complete prompt settlement of binary option contracts and to protect investors from the impact of a clearing member default. OCC references Section 17A of the Exchange Act and Rule 17ad-22(e)(6).
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