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Difficulty: EasyDepositories, Clearing Corporations, and Settlement Entities

Which entity serves as the primary issuer and guarantor of all standardized exchange-listed options contracts traded in the United States?

  1. The Options Clearing Corporation (OCC)Answer
  2. B
    The Depository Trust Company (DTC)
  3. C
    The National Securities Clearing Corporation (NSCC)
  4. D
    The Securities and Exchange Commission (SEC)

Answer

The Options Clearing Corporation (OCC)
The Options Clearing Corporation (OCC) is the central clearinghouse for options traded on U.S. exchanges. It acts as the buyer to every seller and the seller to every buyer, issuing and guaranteeing all standardized options contracts to minimize counterparty default risk.

Step-by-Step Solution

1
Identify the primary role required by the question stem.
The target role is the issuer and guarantor of standardized options contracts.
Options contracts require a central counterparty to standardize terms and eliminate counterparty risk between buyers and sellers.
2
Match the functional role to the appropriate U.S. market clearing entity.
The Options Clearing Corporation (OCC) performs this specific function.
DTC handles physical asset custody and book-entry transfer, NSCC handles equity trade netting and clearance, and the SEC is a regulatory agency.

Key Concept

Role of the Options Clearing Corporation (OCC) in options market structure
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Topics

Depositories, Clearing Corporations, and Settlement Entities

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