Feb 26 (Reuters) – Options Clearing Corp is significantly increasing its headcount and working capital levels to help satisfy regulatory scrutiny tied to its designation as a critical part of the U.S. financial market infrastructure, the company’s new executive chairman said on Wednesday.
The world’s largest clearing organization for options is “absolutely 100 percent oriented toward working through the regulatory changes that are upon us,” said Craig Donohue, a former CME Group Inc chief executive who took over as Options Clearing’s chairman on Jan. 1.
Donohue’s focus on regulatory requirements follows reports last year that the U.S. Securities and Exchange Commission had criticized regulatory compliance, governance and risk management at the company. Donohue, in an interview at the company’s offices in Chicago, declined to speak specifically about reports of the SEC critique.
Options Clearing processes trades for all 12 U.S. options exchanges and for some futures markets. It has nearly 120 clearing members that include the biggest U.S. broker-dealers, futures commission merchants and non-U.S. securities firms.
The Financial Stability Oversight Council in 2012 designated the company as a systemically important Financial Market Utility as part of the Dodd-Frank financial overhaul. The designation requires compliance with risk management standards and heightened oversight by U.S. financial regulators.
“Best practices and, ultimately we believe, regulatory requirements will dictate us having at least six months of operating expenses and liquid financial resources,” Donohue, 53, said. “It’s definitely a significant impact on capital requirements for not just OCC but other clearinghouses as well.”
Options Clearing expects to increase its working capital levels by the end of 2014. Asked about the company’s previous capital levels, Donohue said he had not “dug into the history of all that.”
Regarding staffing, the company is making “a substantial increase, especially vis-à-vis historical headcount trends at OCC,” Donohue said. He did not release specific numbers. Options Clearing has about 475 employees.
Donohue, a lawyer by training, replaced Chairman and CEO Wayne Luthringshausen, who retired after 36 years as chairman. The company separated Luthringshausen’s roles and named President Michael Cahill as the new CEO.
As chief of exchange-operator CME Group, Donohue had little interaction with market regulators at the SEC, which is Options Clearing’s main regulator. CME’s main regulator is the Commodity Futures Trading Commission. (Reporting by Tom Polansek)