The central body that clears and settles all listed options trades in US markets, founded 1973. It guarantees both sides perform and carries out Assignment randomly among sellers.
What this body is
The Options Clearing Corporation (OCC · Options Clearing Corporation) is the central counterparty to every listed options contract in the US market. It stands between each seller and buyer and guarantees performance to both. It is the world's largest equity derivatives clearinghouse, under dual federal oversight.
Why it matters
Without it, every contract would rest on personal trust: will the seller pay if they lose? The clearinghouse removes the question. It becomes the seller to every buyer and the buyer to every seller, and it backs settlement with collateral collected from brokers in real time. That is why traders of listed contracts never ask whether the other side is solvent.
What it manages in practice
It automatically exercises every in-the-money contract at expiration (one-cent threshold). It spreads assignment across sellers by a fair lottery run through brokers. It adjusts contract terms after corporate events (splits, mergers, special distributions) to keep their value equivalent.
Hypothetical example
A stock announces a cash merger. Its open contracts don't vanish. The clearinghouse adjusts their terms so they settle on the deal value, and the holder gets a fair settlement calculated by published rules. A system half a century old manages the chaos you might imagine.
Common mistake
Don't confuse it with an exchange: exchanges are competing trading venues (dozens of them), while the clearinghouse is a single clearing house behind all of them. You trade a contract on any venue and it settles in the same place.
What it manages in practice
Automatic exercise of every in-the-money contract at expiration, random assignment spread fairly across brokers, and adjustment of contract terms for corporate events (splits, mergers, special distributions) to keep value equivalent. The chaos people imagine is run by a system with published rules.
Where to see it on the platform
The education pages explain its role in the life of a contract, from opening to assignment and settlement.
The education pages explain its role in the life of a contract, from opening to settlement.
