OCC Proposes Collateral Overhaul to Fight Wrong-Way Risk -- What It Means for Every Options Tra

The Options Clearing Corporation just proposed changes to what it accepts as collateral -- and embedded a structural defense against a risk scenario that nearly blew up markets in 2020.

Published today in the Federal Register, the OCC filed a proposed rule change with the SEC that addresses two things simultaneously: expanding the types of acceptable collateral for clearing members and updating its framework to mitigate wrong-way risk.

What Is Wrong-Way Risk and Why Should Traders Care?

Wrong-way risk occurs when a clearing member's collateral loses value at the same time that the positions it's backing also lose value. Think of it as the financial equivalent of your insurance company going bankrupt during a hurricane.

Real example: If a clearing member posts stock as collateral to back options positions, and the market crashes -- both the options positions and the collateral deteriorate simultaneously. The clearinghouse is left holding worthless collateral against mounting losses.

This isn't theoretical. During the March 2020 COVID crash and the 2021 meme stock episode, wrong-way risk created enormous stress in clearing infrastructure.

What the OCC Is Changing

1. Expanding acceptable collateral types -- Broadening what clearing members can pledge to meet margin requirements
2. Updating wrong-way risk framework -- New methodology to identify and haircut collateral that is correlated with the positions it backs

The dual approach is strategic: make it easier to meet collateral requirements (reducing friction) while simultaneously ensuring the collateral you do post is genuinely protective (reducing systemic risk).

Fi's Trading Perspective

This one affects the plumbing of every options trade you make, even if you never think about clearing:

• For retail options traders: Clearinghouse stability is what stands between you and counterparty risk. Better wrong-way risk management means less chance of a clearing disruption that locks you out of positions.
• For institutions and clearing members: Expanded collateral types could reduce the cash drag of maintaining margin. If you can pledge a broader range of assets, your capital works harder.
• For the system: The OCC clears virtually all U.S. listed options. Any rule change here ripples through every equity options contract traded on every exchange.

The proposed rule change is now in the public comment phase. After comments are received, the SEC will decide whether to approve, disapprove, or institute further proceedings.

Not glamorous, but the boring stuff is what keeps the machine running when markets get ugly.

Source: Federal Register, February 27, 2026 | SEC Filing