OCC files SEC rule change to launch commercial paper liquidity program

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OCC commercial paper program filing

Highlights

OCC filed an SEC rule change to establish a commercial paper program, allowing up to $1 billion in unsecured debt placements to institutional investors.
The program aims to diversify OCC's funding sources, holding proceeds at the Federal Reserve Bank of Chicago to strengthen settlement resources.
Amendments recognize commercial paper proceeds as qualifying liquid resources and establish new governance for usage during liquidity events, including clearing member defaults.

Liquidity plan expansion and filing details

As reported by the Securities and Exchange Commission, the proposed rule change would establish the commercial paper program as part of OCC's broader liquidity plan for its clearing operations. OCC says the facility is intended to diversify funding sources and provide a more efficient way to secure liquidity as funding needs or commitments change.

OCC serves as the sole clearing agency for standardized equity options listed on national securities exchanges registered with the Commission, and it guarantees the contracts it clears. To manage liquidity risk, it already requires clearing members to maintain a minimum cash contribution to the Clearing Fund and also has access to a syndicated bank credit facility and a non-bank liquidity facility program.

Under the proposal, OCC would be able to raise prefunded liquidity through private placements of unsecured debt to institutional investors, up to an aggregate amount of $1 billion. Proceeds from the program would be held in an OCC account at the Federal Reserve Bank of Chicago.

Settlement resilience and financial system implications

OCC says the initiative would strengthen its liquidity resources and support its ability to meet settlement obligations on time. The proposal also aims to reduce broader systemic risk by giving the clearing house another source of ready funding during periods of market stress or elevated liquidity demand.

The rule change includes amendments that would allow proceeds from the commercial paper program to count as a qualifying liquid resource in OCC's liquidity calculations. It also includes governance changes covering oversight of how the proceeds are used during liquidity events, including a default by a clearing member.

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