September 4, 2024 - In a letter filed with the Securities and Exchange Commission (SEC) today, the FIA Principal Traders Group (FIA PTG) responded to the Option Clearing Corporation (OCC) Proposal to establish a margin add-on charge to help mitigate the risks of zero-days-to-expiration (0TED) options. FIA PTG said the Proposal is poorly designed and will not serve the interests of market participants or the public, lacks material information necessary to meaningfully evaluate it; and at best is imprecise and a blunt instrument to try to solve the OCC’s stated concerns with managing 0DTE options.
FIA PTG members are among the most active providers of liquidity to options markets and accordingly are very aware of the recent growth in 0DTE options as well as the increased number and frequency of option expiries. FIA PTG members have adjusted their pricing models, risk systems and operational processes to manage these changes, so are acutely aware of the adaptations required to facilitate the processing of these unique products.
For the reasons detailed in the letter FIA PTG urged the Commission not to approve the Proposal, which is poorly designed, inefficient, and costly. To the extent the OCC believes additional measures are necessary to address potential risks relating to 0DTE options, FIA PTG would welcome the opportunity to work together to identify a tailored solution to address OCC’s concerns.
