OCC Tweaks Bank Deal to Keep Cash Flowing Smoothly
Published Date: 2/26/2025
Notice
Summary
The Options Clearing Corporation (OCC) wants to update some important terms in its agreement with a bank that helps keep money flowing smoothly during busy times. These changes are part of OCC’s plan to make sure it always has enough cash ready, without changing its main rules. This update affects banks working with OCC and aims to keep the financial system safe and steady, with no immediate cost changes announced.
Analyzed Economic Effects
3 provisions identified: 1 benefits, 2 costs, 0 mixed.
Limited rehypothecation to unlock repo funding
OCC proposes to allow a limited right to rehypothecate non-customer collateral only within a tri-party repo custodial arrangement and only to third‑party cash investors that are legally restricted from further rehypothecation. OCC says this change would make a bank 'repo' facility more commercially attractive, could allow reduced pricing and a larger commitment size, and would support implementing the Bank Repo Facility with a currently approved commitment amount of up to $1 billion.
Clearing Fund collateral may be pledged
The filing states that Clearing Fund collateral and non-customer margin collateral of any suspended Clearing Member may be pledged under the Bank Repo Facility. OCC cites Rules (e.g., OCC Rule 1006(f)) authorizing use of Clearing Fund securities to borrow funds.
OCC funding costs borne by clearing members
OCC states it principally funds operations through the collection of clearing fees and that such costs are ultimately borne by Clearing Members and, in turn, market participants. OCC says implementing a facility that is comparable or lower in cost to its other liquidity facilities would help manage operations more efficiently.
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