State Street is the first bank to become an Options Clearing Corporation (OCC) clearing member a press release said.
OCC will provide central counterparty clearing and settlement through its stock loan program for State Street’s Prime Services platform, which provides integrated custody-based securities lending solutions to investors.
Oberon Knapp, head of Securities Finance at OCC. said State Street’s decision demonstrates the value that central clearing can bring to custody-based services. “Our qualifying central counterparty status provides our members with approximately 95% risk-weighted asset savings compared to uncleared lending activity, and our guarantee helps mitigate counterparty credit risk, allowing our clearing members like State Street to focus more resources and time on their core business. Expanded membership continues to be a top priority for OCC so that the broader financial ecosystem can access the capital efficiency, risk reduction and operational simplicity benefits that OCC’s central clearing services provide.”
OCC currently operates two programs in which it acts as principal counterparty for securities lending transactions: the Stock Loan/Hedge Program where trades are executed bilaterally, and the Market Loan Program where trades are executed anonymously through a loan market. In both programs, OCC becomes the lender to the borrower and the borrower to the lender for each transaction, guaranteeing the value of the lender’s lent shares and of the borrower’s collateral.
