| CHICAGO, April 2
CHICAGO, April 2 The clearinghouse that handles
all U.S. options trades said it has raised fees to cover the
costs of increased regulatory requirements and warned members
that any refund to them will likely be much smaller than in
The fee adjustment, implemented this week by Chicago-based
Options Clearing Corp (OCC), reflects the latest impact on the
financial industry from the Dodd-Frank overhaul, which has
forced firms to expand staffs and implement new technology to
keep pace with regulations.
"There's a whole new regulatory regime with heightened
expectations," OCC spokesman Jim Binder said on Wednesday.
"Because of some of the new regulatory requirements, we need to
have more of a surplus, more capital."
OCC processes trades for all 12 U.S. options exchanges and
for some futures markets. It has nearly 120 clearing members
that include the biggest U.S. broker-dealers, futures commission
merchants and non-U.S. securities firms.
The company on Tuesday implemented a fee of 5 cents to clear
trades with one to 500 contracts, the range in which most
trading takes place, Binder said. The fee had been discounted to
3 cents since 2008, he said.
OCC refunded $47 million to clearing members last year,
$50.1 million in 2012, and $79.6 million in 2011 because fees it
collected exceeded operating expenses and surplus requirements,
according to an annual report for 2013.
Any refund for 2014 will likely be significantly lower,
according to the company.
"OCC's management and board will closely monitor performance
during the remainder of the year and the board will determine
prior to year-end whether to modify or suspend OCC's refund
policy," OCC said in a notice.
The Financial Stability Oversight Council in 2012 designated
OCC as a systemically important Financial Market Utility as part
of Dodd-Frank. The designation requires compliance with risk
management standards and heightened oversight by U.S. financial
Clearinghouses are "realizing they have to run themselves in
a way where they have deeper resources to draw on, a deeper
cushion for any problems that arise in their market," said Bruce
Weber, dean of the Alfred Lerner College of Business and
Economics at the University of Delaware.
Craig Donohue, who became OCC's chairman in January, in
February said the company needed to increase working capital
levels to cover at least six months of operating expenses to
meet regulatory scrutiny.
OCC's focus on regulations follows reports last year that
the U.S. Securities and Exchange Commission had criticized
regulatory compliance, governance and risk management at the
company. The fee adjustment was unrelated to risk management
issues, Binder said.
Donohue formerly was chief executive of exchange-operator
CME Group Inc, which is separately facing push back from
brokers over a decision to raise fees for the first time since
(Reporting by Tom Polansek; Editing by Leslie Adler)