Options Clearing Corporation
The Options Clearing Corporation (OCC) is the central counterparty clearinghouse for all U.S. listed equity options and futures options, guaranteeing the financial obligations of every options contract traded on U.S. exchanges including the CBOE, NYSE American Options, and Nasdaq PHLX.
The OCC was founded in 1973 — the same year the CBOE opened as the first organized options exchange in the United States — and has since grown into the world's largest equity derivatives clearing organization. It sits between every buyer and every seller of a U.S. listed options contract, becoming the buyer to every seller and the seller to every buyer. This central counterparty function means that traders never face direct credit risk from the party on the other side of their trade; the OCC guarantees performance on all contracts.
The OCC is jointly owned by the exchanges on which options are traded, including the CBOE, NYSE American Options, Nasdaq PHLX, and several others. It is registered with the Securities and Exchange Commission (SEC) as a registered clearing agency and is designated as a Systemically Important Financial Market Utility (SIFMU) by the Financial Stability Oversight Council (FSOC), reflecting its critical role in the stability of U.S. financial markets.
When an options trader exercises an option or is assigned, the OCC manages the settlement process. For equity options, the OCC coordinates the transfer of shares between the exercising party and the assigned party — typically settling in T+1 for stock delivery. The OCC uses a system called the Continuous Net Settlement (CNS) system in coordination with the Depository Trust and Clearing Corporation (DTCC) to process these deliveries efficiently at scale.
The OCC also administers the equity options industry standard for exercise and assignment. The exercise cutoff time for most equity options is 5:30 PM Eastern Time on the expiration date — a detail that matters enormously for traders managing in-the-money positions near expiration. Automatic exercise applies to options that are in-the-money by at least $0.01 at expiration, unless the holder instructs otherwise.
For retail traders, the OCC operates largely in the background, but its role is fundamental to trust in the listed options market. Without a central clearinghouse, every options transaction would carry bilateral counterparty risk — the possibility that the trader on the other side of the contract could default. The OCC's guarantee function eliminates this concern and allows the U.S. options market to handle hundreds of millions of contracts daily without systemic credit risk.