US Options Market Grapples With ‘Concentration Risk’ in Clearing

(Bloomberg) -- As the US options marketplace heads for a sixth consecutive twelvemonth of grounds volume, immoderate best-known names successful the manufacture are increasing tense astir its over-reliance connected a tiny radical of banks to warrant trades for the biggest marketplace makers.

Every listed US options commercialized goes done The Options Clearing Corp., a cardinal counterparty that handles much than 70 cardinal contracts a time during engaged periods. The trades are submitted to the OCC by its members — who assistance trades get to the clearing location and enactment arsenic guarantors successful lawsuit their clients spell bust.

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There’s a tiny radical of firms astatine the top. Out of dozens of members, the apical 5 contributed astir fractional of the OCC’s default money successful the 2nd 4th of 2025. Market participants mention Bank of America Corp., Goldman Sachs Group, Inc. and ABN Amro Bank NV arsenic the 3 biggest, handling astir positions from marketplace makers, who instrumentality the different broadside of astir each options trade. The information truthful overmuch measurement goes done specified a tiny fig of firms raises the hazard of wide losses if 1 of them should fail.

“I deliberation determination is important attraction hazard successful clearing intermediation,” Craig Donohue, main enforcement serviceman of Cboe Global Markets, Inc., said successful an interview, without naming circumstantial banks. “I bash interest astir that.”

The hazard of a large slope failing is improbable — but not unheard of. Donohue has his ain conflict scars from a clearing subordinate default: successful October 2011, erstwhile helium was CEO of CME Group Inc., MF Global declared bankruptcy.

The much contiguous hazard is that these banks whitethorn tally retired of capableness to enactment the bonzer maturation of the listed derivatives market, with OCC mean regular measurement soaring 52% successful October from a twelvemonth earlier. That’s starring to a emergence successful “self-clearing” by marketplace makers — meaning they go much nonstop members of the clearing location — which comes with its ain risks, fixed that marketplace makers are much thinly capitalized than banks.

Bank of America and Goldman Sachs declined to comment. ABN Amro did not instantly respond to a petition for comment.

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Only a fistful of clearing brokers person the quality to cross-margin betwixt futures and options, wherever other positions successful related instruments tin cancel each different out, reducing the magnitude of borderline needed. For example, if a trader is agelong S&P 500 E-Mini Futures, but abbreviated S&P 500 Index Options, the nett hazard presumption would beryllium reduced.