On Jan. 16, FIA submitted a letter to the Securities and Exchange Commission commenting on a proposal by the Options Clearing Corporation to amend certain provisions of its default management rules. The amendments pertain to tools intended to address liquidity shortfalls and credit losses following a clearing member default. FIA raised questions about several areas of the proposal.
In particular FIA questioned OCC's approach to clearing fund replenishment and said OCC should explain its approach for determining the amount of funding that clearing firms would be required to contribute to help cover default-related losses. FIA also questioned OCC's approach to "partial tear-ups" under which some contracts would be terminated. FIA expressed concerns with certain specific details of the partial tear-up process and opposed a provision that would reallocate losses from a tear-up to all members of the clearinghouse regardless of whether they were involved in the transactions being terminated.
The full letter is available in Resources on the right.
