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Difficulty: EasyDepositories, Clearing Corporations, and Settlement Entities

Which central clearing organization serves as both the issuer and guarantor of all standardized exchange-traded options contracts in the United States capital markets?

  1. The Options Clearing Corporation (OCC)Answer
  2. B
    The National Securities Clearing Corporation (NSCC)
  3. C
    The executing broker-dealer
  4. D
    The Securities and Exchange Commission (SEC)

Answer

The Options Clearing Corporation (OCC) acts as the issuer and guarantor of standardized options contracts.
The Options Clearing Corporation (OCC) is the sole clearinghouse for standardized options traded on U.S. exchanges. By operating as the central counterparty, the OCC issues and guarantees options contracts, protecting options investors against default risk.

Step-by-Step Solution

1
Identify the primary function described in the question stem (issuing and guaranteeing options contracts).
The target clearing entity must be specialized in options clearing and risk management.
Options contracts require a central counterparty to guarantee performance for buyers and sellers.
2
Evaluate the roles of primary capital market clearing entities.
The Options Clearing Corporation (OCC) is the designated clearing house for all U.S. exchange-traded options.
The OCC acts as the buyer to every seller and the seller to every buyer for options contracts.

Key Concept

Role of the Options Clearing Corporation (OCC) as the central issuer and guarantor for exchange-traded options.
Estimated Time:45s
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Topics

Depositories, Clearing Corporations, and Settlement Entities

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