The Options Clearing Corporation (OCC) is working towards a complete replacement of its technology, according to its chief exec John Davidson speaking to Traders Magazine (Markets Media). Through investments in hardware and software, OCC’s clearing system has handled huge growth in volume: “In January, we cleared 63 million contracts in a single day. Five years ago, that was a good week,” Davidson said.
OCC is also “carefully exploring” moving out of its two geographically diverse on-premises data centers. In October 2021, OCC filed an advanced notice with the Securities and Exchange Commission, reflecting their plans to move forward and leverage both the compute, the storage and the network capabilities of a cloud service provider.
As the platform running OCC’s core applications for over 20 years, ENCORE has accommodated growth in average daily transaction volumes and OCC has managed periods of extreme market volatility and stress, including the COVID-19 global pandemic successfully. However, ENCORE was designed to operate in traditional on-premises data centers and is less flexible than a platform that can operate either on-premises or in the cloud.
In 2021, there’s been a tremendous spike in retail investing, and this year, according to Davidson, there is some evidence of growing participation by institutions. The level of volatility and the interest rate environment are also quite closely related to trading volumes and Davidson said there’s every reason to believe that there will be in a rising interest rate environment for the first time in quite some time, which might be boosting hedging practices.
From a technology perspective, OCC has to plan for trading volumes to increase notwithstanding actual volume. “We always make sure that we have the wherewithal in our clearing processing environment to handle a very significant uptick in volume,” said Davidson.