OCC Rule Change on Collateral Eligibility and Margin Requirements Approved

Content

April 7, 2026.

I. Introduction

On February 12, 2026, the Options Clearing Corporation (“OCC”), filed with the Securities and Exchange Commission (“Commission”),
pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Exchange Act”) (1) and Rule 19b-4 thereunder, (2) a proposed rule change regarding collateral eligibility and margin requirements (hereinafter “Proposed Rule Change”). The
Proposed Rule Change was published for comment in the
Federal Register
on February 27, 2026. (3) The Commission has not received any comments on the Proposed Rule Change. For the reasons discussed below, the Commission
is approving the Proposed Rule Change.

II. Background

OCC is a central counterparty (“CCP”), which means that, as part of its function as a clearing agency, it interposes itself
as the buyer to every seller and seller to every buyer for certain financial transactions. As the CCP for the listed options
markets in the United States, (4) as well as for certain futures and stock loans, OCC is exposed to various risks arising from providing

  clearance and settlement services to its Clearing Members. [(5)]() Because OCC is obligated to perform on the contracts it clears, one such risk that OCC is exposed to is credit risk, including
  the risk that OCC would not maintain sufficient financial resources to cover exposures if one of its Clearing Members defaults.

One of the ways OCC manages credit risk is through the collection of margin collateral from its Clearing Members. To address
the risk that the value of such collateral may be insufficient as the result of price changes, OCC limits the set of assets
it accepts as margin collateral and applies controls, such as haircuts and concentration limits, on the collateral it accepts.
OCC also addresses credit risk by applying a margin add-on charge to collateralize risks presented by cleared positions involving
equities and ETNs issued by a Clearing Member and its affiliates. (6) As described below, OCC proposes to stop accepting certain types of collateral and to address specific wrong-way risk presented
by certain Clearing Member positions. (7) OCC also proposes a series of organizational and technical changes to its rules related to collateral.

A. Discontinuance of Certain Collateral Types

Currently, OCC's rules provide for various types of assets as margin collateral, (8) including letters of credit, (9) or guarantees of payment from a bank, and government-sponsored entity (GSE) debt securities. (10) However, on December 19, 2024, OCC announced its determination to disallow letters of credit and GSE debt securities as acceptable
collateral. (11) OCC states that no Clearing Member has pledged GSE debt securities as margin collateral since July 11, 2023, and that no letters
of credit remain on deposit. (12)

To maintain the ability to accept letters of credit and GSE debt securities, consistent with OCC's current rules, would require
OCC and its Clearing Members to test the functionality to support these collateral types in the new clearance and settlement
system, Ovation. (13) Further, OCC asserts it would incur additional costs associated with ongoing risk monitoring and reviews of its procedures
to support the acceptance of letters of credit and GSE debt securities. (14) As a result, OCC proposes to change its rules to no longer allow Clearing Members to post letters of credit and GSE debt securities
as margin collateral. (15)

B. Specific Wrong-Way Risk

As noted above, OCC proposes changes designed to address specific wrong-way risk presented by certain Clearing Member positions.
Currently, OCC manages wrong-way risk in collateral, in part, by disapproving common stock as margin collateral for a Clearing
Member where such stock is issued by the Clearing Member or its affiliate except where the common stock serves as a hedge
to the Clearing Member's positions. (16) OCC also applies a margin add-on charge designed to account for specific wrong-way risk (the “SWWR Add-on”) in a Clearing
Member's positions in cleared contracts. (17) OCC proposes to extend the SWWR Add-on to cover Clearing Member positions in exchange traded products (ETPs) that hold spot
cryptocurrency for which the Clearing Member or its affiliate serves as the custodian of the fund's cryptocurrency holdings. (18) OCC believes that extending the SWWR Add-on to spot cryptocurrency ETPs when the Clearing Member is affiliated with the custodian
of such ETP is appropriate given the unique custody risks associated with cryptocurrencies. (19) As of the time of filing, OCC represented that only one Clearing Member has an affiliate that is a custodian for a spot cryptocurrency
ETP. (20) Further, OCC currently limits Clearing Members' ability to pledge such ETPs as margin collateral to the amount that is risk
reducing for activity in cleared positions. (21)

C. Reorganization and Technical Changes

Separate from the substantive changes described above, OCC proposes to reorganize its current Rule 604 and to making conforming
edits as needed to its Rules to facilitate such reorganization. Specifically, OCC Rule 604 would be replaced by three separate
rules addressing: (i) the form of collateral OCC accepts (proposed Rule 604A); (ii) how OCC holds and invests collateral (proposed
Rule 604B); and (iii) how OCC values the collateral, respectively (proposed Rule 604C). OCC proposes to further reorganize
its rules by incorporating the current interpretations and policies attached to OCC Rule 604 directly into the text of the
rule. For example, I&P .07 to OCC Rule 604, which requires assets deposited as collateral with OCC to be free of liens and
other encumbrances, would become proposed Rule 604B(b)(1)(B), but otherwise remain virtually intact. Further, OCC proposes
other ministerial changes to its Rule 604 and related rules, including breaking up long paragraphs and adding headings, (22) renumbering cross-references, (23) and removing unnecessary or inaccurate language. (24)

III. Discussion and Commission Findings

Section 19(b)(2)(C) of the Exchange Act requires the Commission to approve

  a proposed rule change of a self-regulatory organization if it finds that the proposed rule change is consistent with the
  requirements of the Exchange Act and the rules and regulations thereunder applicable to the organization. [(25)]() Under the Commission's Rules of Practice, the “burden to demonstrate that a proposed rule change is consistent with the Exchange
  Act and the rules and regulations issued thereunder . . . is on the self-regulatory organization [`SRO'] that proposed the
  rule change.” [(26)]()

The description of a proposed rule change, its purpose and operation, its effect, and a legal analysis of its consistency
with applicable requirements, must all be sufficiently detailed and specific to support an affirmative Commission finding, (27) and any failure of an SRO to provide this information may result in the Commission not having a sufficient basis to make an
affirmative finding that a proposed rule change is consistent with the Exchange Act and the applicable rules and regulations. (28) Moreover, “unquestioning reliance” on an SRO's representations in a proposed rule change is not sufficient to justify Commission
approval of a proposed rule change. (29)

After carefully considering the Proposed Rule Change, the Commission finds that the Proposed Rule Change is consistent with
the requirements of the Exchange Act and the rules and regulations thereunder applicable to OCC. More specifically, for the
reasons given below, the Commission finds that the Proposed Rule Change is consistent with Section 17A(b)(3)(F) of the Exchange
Act, (30) and Rules 17ad-22(e)(5), 17ad-22(e)(6), and 17ad-22(e)(21) thereunder, as described in detail below. (31)

A. Consistency With Section 17A(b)(3)(F) of the Exchange Act

Section 17A(b)(3)(F) of the Exchange Act (32) requires, among other things, that the rules of a clearing agency be designed to promote the prompt and accurate clearance
and settlement of securities transactions and, to the extent applicable, derivative agreements, contracts, and transactions
and to assure the safeguarding of securities and funds which are in the custody or control of the clearing or agency or for
which it is responsible.

Disallowing certain types of margin collateral, namely GSE debt securities and letters of credit, would reduce the cost and
complexity related to both OCC's new clearance and settlement systems and to OCC's monitoring of risks related to such collateral
types. As noted above, Clearing Members have not pledged GSE debt securities since 2023 and are not currently pledging letters
of credit as margin collateral. As a result, the proposed change in collateral eligibility will reduce operational costs and
complexity without affecting current collateral contributions. Reducing operational costs and complexity in this way improves
efficiency at OCC, which is consistent with the promotion of prompt and accurate clearance and settlement.

Separately, OCC's proposal to extend the SWWR Add-on will increase the margin collateral collected from a Clearing Member
with positions in spot cryptocurrency ETPs for which the Clearing Member or its affiliates serves as the custodian. Collecting
margin to recognize the potential loss in value of the ETP concurrent with a Clearing Member default would increase the likelihood
that OCC would hold sufficient margin collateral to address the default without resorting to loss mutualization through the
use of non-defaulting Clearing Members' contributions to the Clearing Fund. Because it reduces the likelihood of loss mutualization,
the Proposed Rule Change is consistent with the safeguarding of securities and funds which are in OCC's custody or control.

Accordingly, the Commission believes that the Proposed Rule Change is consistent with the requirements of Section 17A(b)(3)(F)
of the Exchange Act. (33)

B. Consistency With Rule 17ad-22(e)(5) Under the Exchange Act

Rule 17ad-22(e)(5) under the Exchange Act requires, in part, that a covered clearing agency establish, implement, maintain
and enforce written policies and procedures reasonably designed to limit the assets it accepts as collateral to those with
low credit, liquidity, and market risks. (34) As described above, OCC proposes to amend its rules to disallow the posting of GSE debt securities and letters of credit as
margin collateral. The removal of these two types of collateral does not affect the credit, liquidity, or market risk associated
with the collateral that OCC will continue to accept as margin (e.g., cash, government securities, money market fund shares, and common stock). Accordingly, the Commission believes that disallowing
GSE debt securities and letters of credit as margin collateral is consistent with the requirements of Rule 17ad-22(e)(5). (35)

C. Consistency With Rule 17ad-22(e)(6) Under the Exchange Act

Rule 17ad-22(e)(6)(i) under the Exchange Act requires that a covered clearing agency establish, implement, maintain and enforce
written policies and procedures reasonably designed to cover, if the covered clearing agency provides central counterparty
services, its credit exposure to participants by establishing a risk-based margin system that, at a minimum considers, and
produces margin levels commensurate with, the risks and particular attributes of each relevant product, portfolio, and market. (36)

As described above, OCC proposes to extend the application of its SWWR Add-on. Specifically, OCC proposes to cover Clearing
Member positions in spot cryptocurrency ETPs for which the Clearing Member or its affiliate serves as the custodian of the
fund's cryptocurrency holdings. OCC's prior adoption of the SWWR Add-on was consistent with Rule 17Ad-22(e)(6)(i) under the
Exchange Act. (37) The SWWR Add-on is designed to produce margin levels commensurate with the particular attributes of certain products in terms
of the likely recovery available in the event of a default by the issuing Clearing Member. (38) Similarly, the default of a Clearing Member may affect the value of a spot cryptocurrency ETP positions where that member
is also the fund's custodian. The proposed change will extend the protection provided to OCC by the SWWR Add-on to address
a potential loss in value of a Clearing Member's spot cryptocurrency ETP positions, at the time of default, related to the
member's (or its affiliate's) role as when that member as the fund's custodian; which would be consistent with OCC's existing
limitations on Clearing Members posting such assets as margin collateral.

Accordingly, and for the reasons stated above, the Commission believes the extension of the SWWR Add-on designed to cover
specific wrong-way

  risk arising out of a Clearing Member's relationship to a particular underlying product is consistent with Rule 17ad-22(e)(6)(i)
  under the Exchange Act. [(39)]()

D. Consistency With Rule 17ad-22(e)(21) Under the Exchange Act

Rule 17ad-22(e)(21) under the Exchange Act requires that a covered clearing agency establish, implement, maintain and enforce
written policies and procedures reasonably designed to be efficient and effective in meeting the requirements of its participants
and the markets it serves. (40) As described above, OCC proposes to disallow GSE debt securities and letters of credit as margin collateral because continuing
to accept such collateral carries with it certain costs and complexity. Disallowing such collateral types would reduce the
testing required of OCC and its Clearing Members for Ovation. Further, the proposed change will not negatively affect the
current set of margin collateral that OCC holds based on OCC's representations that no Clearing Member has pledged GSE debt
securities since July 11, 2023, and that no letters of credit remain on deposit. As a result, the proposed change would reduce
inefficiency without reducing the effectiveness of Clearing Member collateral currently posted to OCC.

Further, as described above, OCC proposes a number of non-substantive changes to reorganize its margin rules such as consolidating
the provisions of Rule 604 and related interpretations and policies and dividing lengthy provisions into subsections with
headers. Such changes the non-substantive re-organization and consolidation helps to improve the readability, and, thus, the
efficiency and effectiveness of OCC's rules. Relatedly, OCC proposes a number of non-substantive corrections, such as updating
cross-references and removing inaccurate or unnecessary language, which will also improve the readability of OCC's margin
rules.

Accordingly, and for the reasons stated above, the Commission believes the removal of GSE debt and letters of credit as acceptable
margin collateral is consistent with Rule 17ad-22(e)(21) under the Exchange Act. (41)

IV. Conclusion

On the basis of the foregoing, the Commission finds that the Proposed Rule Change is consistent with the requirements of the
Exchange Act, and in particular, with the requirements of with Section 17A(b)(3)(F) of the Exchange Act, (42) and Rules 17ad-22(e)(5), 17ad-22(e)(6), and 17ad-22(e)(21) thereunder. (43)

It is therefore ordered pursuant to Section 19(b)(2) of the Exchange Act (44) that the proposed rule change (SR-OCC-2026-001) be, and hereby is, approved. (45)

For the Commission, by the Division of Trading and Markets, pursuant to delegated authority. (46)

Sherry R. Haywood, Assistant Secretary. [FR Doc. 2026-06930 Filed 4-9-26; 8:45 am] BILLING CODE 8011-01-P

Footnotes

(1) 15 U.S.C. 78s(b)(1).

(2) 17 CFR 240.19b-4.

(3) See Exchange Act Release No. 104882 (Feb. 24, 2026), 91 FR 9897 (Feb. 27, 2026) (File No. SR-OCC-2026-001) (“Notice”).

(4) OCC describes itself as “the sole clearing agency for standardized equity options listed on a national securities exchange
registered with the Commission (`listed options').” See Exchange Act Release No. 96533 (Dec. 19, 2022), 87 FR 79015 (Dec. 23, 2022) (File No. SR-OCC-2022-012).

(5) Capitalized terms used but not defined herein have the meanings specified in OCC's Rules and By-Laws, available at https://www.theocc.com/company-information/documents-and-archives/by-laws-and-rules.

(6) See Exchange Act Release No. 87718 (Dec. 11, 2019), 84 FR 68992, 68993 (Dec. 17, 2019 (File No. SR-OCC-2019-010).

(7) Specific wrong-way risk arises at a CCP when an exposure to a participant is highly likely to increase when the creditworthiness
of that participant is deteriorating. Exchange Act Release No. 78961 (Sept. 28, 2016), 81 FR 70786, 70816 n.317 (Oct. 13,
2016) (S7-03-14).

(8) See OCC Rule 604.

(9) See OCC Rule 604(c) (allowing Clearing Members to deposit letters of credit denominated in U.S. dollars issued by banks or trust
companies approved by OCC). OCC also accepts margin collateral in the form of cash, government securities, money market fund
shares, and common stock. See OCC Rule 604.

(10) See OCC Rule 604(b)(2). OCC's By-Laws define “GSE debt securities” to mean such debt securities issued by Congressionally chartered
corporations as the Risk Committee may from time to time approve for deposit as margin. OCC By-Laws, Article I, Section 1,
G.

(11) See Notice, 91 FR at 9898. See also, OCC Information Memo #55740 (Dec. 19, 2024), available at https://infomemo.theocc.com/infomemos?number=55740.

(12) See Notice, 91 FR at 9898.

(13) See id.

(14) See id.

(15) Such changes will affect OCC's By-Laws, Rules, Collateral Risk Management Policy, Default Management Policy, Liquidity Risk
Management Framework, and Recovery and Wind-Down Plan.

(16) See Interpretation and Policy .16 to OCC Rule 604.

(17) See Notice, 91 FR at 9899 n.17.

(18) OCC proposes to amend its Margin Policy to effectuate the proposed extension of the SWWR Add-on.

(19) See Notice, 91 FR at 9899. OCC gave the example of cybersecurity-related theft of the cryptocurrency leading to a decline in the
value of the ETP at the same time that the Clearing Member may default on obligations to OCC. Id.

(20) Id.

(21) See Notice, 91 FR at 9899 n.21. OCC did not propose a change in collateral eligibility related to spot cryptocurrency ETPs.

(22) For example, OCC proposes to divide certain provisions of current OCC Rule 604(b)(i) (pertaining to equity issues) into subsections
of proposed Rule 604A(b)(2). See Notice, 91 FR at 9900.

(23) For example, the reference in OCC Rule 705 to OCC Rule 604(b)(3) would be replaced with a reference to proposed OCC Rule
604A(b)(2). See Notice, 91 FR at 9902.

(24) For example, OCC proposes to remove references to OCC Rule 610T throughout OCC's rules as unnecessary because Rule 610T was
removed from OCC's rules following a transitional period to the current escrow deposit program. See Notice, 91 FR at 9902; see also Exchange Act Release No. 78675 (Aug. 25, 2016), 81 FR 60099, 60105 (Aug. 31, 2016) (File No. SR-OCC-2016-009).

(25) 15 U.S.C. 78s(b)(2)(C).

(26) Rule 700(b)(3), Commission Rules of Practice, 17 CFR 201.700(b)(3).

(27) Id.

(28) Id.

(29) Susquehanna Int'l Group, LLP v. Securities and Exchange Commission, 866 F.3d 442, 447 (D.C. Cir. 2017).

(30) 15 U.S.C. 78q-1(b)(3)(F).

(31) 17 CFR 240.17ad-22(e)(5), (e)(6), and (e)(21).

(32) 15 U.S.C. 78q-1(b)(3)(F).

(33) 15 U.S.C. 78q-1(b)(3)(F).

(34) 17 CFR 240.17ad-22(e)(5).

(35) 17 CFR 240.17ad-22(e)(5).

(36) 17 CFR 240.17ad-22(e)(6)(i).

(37) See Exchange Act Release No. 87718 (Dec. 11, 2019), 84 FR 68992, 68995 (Dec. 17, 2019) (File No. SR-OCC-2019-010).

(38) Id.

(39) 17 CFR 240.17ad-22(e)(6)(i).

(40) 17 CFR 240.17ad-22(e)(21).

(41) 17 CFR 240.17ad-22(e)(21).

(42) 15 U.S.C. 78q-1(b)(3)(F).

(43) 17 CFR 240.17ad-22(e)(5), (e)(6), and (e)(21).

(44) 15 U.S.C. 78s(b)(2).

(45) In approving the proposed rule change, the Commission considered the proposal's impact on efficiency, competition, and capital
formation. 15 U.S.C. 78c(f).

(46) 17 CFR 200.30-3(a)(12).

Download File

Download