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John Davidson on OCC's technology changes, options education, and the challenges of continuing options growth | John Lothian News

John Davidson on OCC’s technology changes, options education, and the challenges of continuing options growth

John Lothian

John Lothian

Executive Chairman and CEO

John Davidson is CEO of the OCC, a position he has held since December of 2018. He spoke with John Lothian at the FIA Boca 2022 conference about how the OCC has handled the “remarkable” growth in options trading volume and the recent increase in retail options participation, and how it continues to educate potential options traders.

The OCC has a 22-year old technology that is very robust and resilient, Davidson said.  “It doesn’t have a problem with the growth in volume.”  But it’s not very flexible, he added, so the OCC has been in a multi-year process replacing that technology and moving to the public cloud. 

These are challenging times with the continued growth in options volume, and the OCC needs to make sure they are providing a good education for traders. “These are risk transfer products,” Davidson said. “Investors need a thorough understanding of the benefits but also the risks.”

OCC provides free investor education, and it has rewritten the Options Disclosure Document, the fundamental prospectus-like document for options securities, making it much more readable and usable, he said.  “The new generation of options securities investors tend to transact from their cell phones, and it’s not easy to read a prospectus on your cell phone,” Davidson said.

OCC is more than halfway through its Renaissance Project, which it is building in cooperation with the Nasdaq technology team, he said. The go-live date is estimated to be at the end of the second quarter of 2024. “There will be rigorous testing once we’ve done with development,” Davidson said. 

He does not think a transaction tax on options trades is very likely in the current environment in Washington, D.C., but he said the OCC has to be vigilant and stay on top of the issue. The OCC’s Julie Bauer is leading that effort, he said. 

In educating the next generation of traders, the pandemic has actually been somewhat helpful, Davidson said, because the OCC has more participation in its virtual seminars than it had in its traveling live seminars. It has partnered with FINRA on some fundamentals of investing in the options market and is trying to make sure it distributes those materials more widely. The OCC also redesigned its web site to make it more user-friendly. 

He said OCC would be back in its various offices in April 2022, but “we will be much more flexible” about letting people schedule work from home vs. office time. The organization has learned from the pandemic. 

“We were really fortunate in that we did a tabletop pandemic exercise in November of 2019 just before [the pandemic] started, so we knew the technology was workable. We use WebEx, and everyone knows a lot more about using it than they did three years ago,” he said. He and Scot Warren, the COO, do a weekly call with all the employees and make sure they communicate constantly. “The most important thing is the health and safety of our employees,” Davidson said. 

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