The Options Clearing Corporation continues to primarily focus on its Renaissance program this year, as the organization prepares to begin external industry-wide testing, according to Mike Hansen, Chief Clearing and Settlement Services Officer at OCC.
OCC, the world’s largest equity derivatives clearing organization, received a no-objection notice from the U.S. Securities and Exchange Commission (SEC) in October 2022, enabling the organization to move forward with its Renaissance Initiative, a multi-year investment to comprehensively redevelop and modernize the company’s risk management, clearing and data systems.
“We’re building our new core clearing, risk management, and data management system, Ovation, with state-of-the-art technology in the cloud to provide enhanced efficiency and flexibility for all stakeholders as well as an improved experience using our system,” Hansen said.
He said that Ovation’s modular architecture will allow OCC to quickly and safely create environments for testing new exchange products.
“From a technology standpoint, products may be ready for launch in as little as a month, instead of three months or more,” he told Traders Magazine.
“Data will be better organized and available more quickly. Stakeholders will be able to customize the data they receive so they’re only getting the information that matters to their business,” he said.
Ovation will include what OCC refers to as three different pillars: clearing and settlement, data, and risk management.
“When we roll out testing this year, it will include testing of all three pillars. They are all part of the same system, but because they’re modular, they’re separate components from each other,” Hansen said.
This means that upgrades can be made to individual sections, unlike ENCORE which is a “monolithic” architecture where the entire system must be modified rather than individual parts, he said.
“This enables greater flexibility and efficiency for our teams working on Ovation, which will translate to decreased potential for disruption and time saved for our members and exchanges,” he commented.
Hansen added that as OCC replaces its core clearing, data, and risk management applications with cloud technology, process re-engineering and automation will provide operational efficiencies for clearing members, including improved access and greater transparency into transaction information and history, ability to more proactively monitor the settlement cycle for each transaction, streamlined margin calculations during nightly processing, and access to self-service reporting.
“Ovation’s architecture will provide greater efficiency for margin, stress-testing, and back-testing calculations,” he stressed.
Ovation’s cloud environment will enable OCC to quickly deploy technical upgrades, accelerate time to market for new exchange products, and enhance access to data for our members and exchanges
“Overall, Ovation’s design will not only provide operational efficiencies but also enable future enhancements,” Hansen said.
He added that internally, their teams are busy completing development work and performing quality assurance checks to make sure OCC is ready to roll out certification testing for Ovation to the industry later this year. “We’re very excited to let everyone get their hands on Ovation for the first time,” he said.
Hansen said that testing is mandatory and will cover data exchange with OCC.
Following that will be testing daily processing environments and ad hoc testing by exchanges and members, he said.
“We anticipate external testing for Ovation to continue until launch in 2025,” he commented.
Technology transformation continues to be top of mind for the industry and OCC because the newer technology available today, such as the cloud, DLT, and AI, is very different from what we had years ago and has the potential to enable financial infrastructure organizations like OCC to enhance their resiliency, security and scalability to the benefit of all market participants, according to Hansen.
For example, he said, Ovation will be built with modular architecture, allowing OCC to quickly and safely create environments for testing new exchange products.
OCC can also utilize automation to remove much of the manual system work that was previously involved with onboarding new products, he added.
“From a technological standpoint, products can be fully tested and demonstrate readiness to launch much more quickly,” he said.
Hansen further said that use of the cloud will also offer improvements to how their stakeholders access their data, as it will be better organized and available more quickly.
“In the future, we’ll also be able to offer even greater benefits and customization through API access,” he said.
Delivering Ovation and the associated work involved with this transformation will help provide the foundation for continuous improvements going forward, Hansen said.
“Essentially, Ovation’s design will provide operational efficiencies and facilitate future enhancements,” he said.
