OCC Adds $1 Billion in Liquidity From New Pension Fund

Following the regulatory filing that Global Custodian reported on Monday that OCC would expand securities financing to buy-side firms, OCC has said that it established a pre-funded, $1 billion committed repurchase facility with an undisclosed pension fund.

The new facility brings OCC’s overall liquidity resources from $2 to $3 billion and gives the organization diversity in its lenders, as previously only banks and broker-dealers were involved. These liquidity facilities help ensure that OCC can fund payment obligations to clearing members in a timely fashion.

Adding a pension fund is also important for OCC, because new bank capital requirements may limit the supply of these credit facilities from banks, says John Fennell, executive vice president of Risk Management at OCC.

“This was an initial step into this type of innovative alternative to securing liquidity. We believe this is a viable alternative that provides for immediate access to liquidity long-term. As we validate the model and more lenders enter the market, we believe this will become an attractive alternative to reduce our concentration risk and overall pro-cyclicality in our markets. Depending on our needs we would look to continue with a mix between traditional and the pension-based funding to maintain a level of diversification,” he adds.

“As a systemically important organization, we must ensure that we have access to liquidity at all times,” says Craig Donohue, executive chairman of OCC. “Increasing our total resources and implementing this innovative solution to expand the range of qualified lenders that we rely upon will facilitate the continued growth of the U.S. options industry and the futures markets that we serve while further enhancing our resiliency.”