Definition
The Options Clearing Corporation, or OCC, is the central counterparty for all exchange-listed options in the United States. Founded in 1973, it sits between every buyer and every seller, becoming the buyer to each seller and the seller to each buyer once a trade is matched.
By standing in the middle of every contract, the OCC guarantees performance: the holder of an option can always exercise, and the writer's obligation is always backed, regardless of whether the original counterparty defaults.
Why it matters
How it works
After a trade is executed on an exchange, it is submitted to the OCC, which novates the contract — replacing the bilateral agreement with two separate contracts facing the OCC. The clearinghouse then tracks open positions, collects margin from clearing members, and processes exercise and assignment notices.
To absorb losses if a member fails, the OCC maintains a layered safeguard system of member margin, a clearing fund, and its own capital, ensuring obligations are met even under stress.