New OCC filing seeks to amend the process for liquidating positions for suspended options clearing members (Citadel is an options clearing member) SR-OCC-2021-004
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| Author       | Source       | 
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| [u/Scalpel_Jockey9965](https://www.reddit.com/user/Scalpel_Jockey9965/) | [Reddit](https://www.reddit.com/r/GME/comments/mkphuq/new_occ_filing_seeks_to_amend_the_process_for/) | 

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[DD 📊](https://www.reddit.com/r/GME/search?q=flair_name%3A%22DD%20%F0%9F%93%8A%22&restrict_sr=1)

This rule is set to drop tomorrow (4/6/2021) on the federal register. You are able to see an unpublished versions of proposed rule changes.

<https://public-inspection.federalregister.gov/2021-06989.pdf>

This new rule change amends the Options Clearing Corporation (OCC) Rule 1104. What's really interesting about this rule is that it provides an order of events in the case that an options clearing member is suspended.

When an options clearing member is suspended, their current positions are then auctioned off to other OCC members. The proceeds from these auctions are then used to close out their other high risk positions.

*"Rule 1102 enumerates the grounds upon which OCC may suspend one of its Clearing Members.4 Following the suspension of any Clearing Member, OCC would take a number of steps designed to reasonably ensure that the Clearing Member's suspension is managed in an orderly fashion. Among the steps that OCC may take to manage a Clearing Member's suspension is liquidating the remaining collateral, open positions and/or exercised/matured contracts (i.e., the remaining portfolio) of the suspended Clearing Member. "*

Ape speak: when members get booted, their positions are sold at auction to other participants.

*"OCC believes that participation by more bidders generally facilitates more competitive bids on a suspended Clearing Member's portfolio. Competitive bids are necessary for OCC to sell the portfolio at a market price that minimizes the loss to OCC and its Clearing Members, and enable OCC to successfully complete an auction in a timely manner and thereby manage a Clearing Member default in a timely manner.*"

Ape speak: They want to change the rules to allow more auction participants to hasten the liquidation process

" *First, OCC proposes to revise I&P .02(c) to reflect that Clearing Members would not need to be invited by OCC to become pre-qualified auction bidders; instead, the revised language in I&P .02(c) would make clear that all Clearing Members are invited to participate in auctions of a suspended Clearing Member's remaining portfolio.* "

Ape Speak: Previously the rule required these liquidation auctions to be invite only. Now any options clearing member can attend the auction by just applying.

**"***Further, the revisions to I&P .02(c) would remove the existing requirements that a non-Clearing Member must actively trade in the asset class in which it proposes to submit bids and must actively trade in markets cleared by OCC. Instead, the revisions to I&P .02(c) would make clear that non-Clearing Members could become pre-qualified auction bidders by (i) having a Clearing Member sponsor to submit bids on behalf of the non-Clearing Member, (ii) having a Clearing Member agree to guarantee and settle any accepted bid made by the non-Clearing Member, and (iii) completing any required auction documentation in advance.*"

"*Accordingly, OCC proposes to eliminate the pre-qualification requirements related to a non-Clearing Member's trading experience.* "

Ape Speak: Now even non clearing members can take part in the liquidation auction with a sponsorship from another clearing member. Additionally these new participants no longer have to have "significant trading experience".

Conclusion: The noose is tightening and everyone sees the inevitable for what it is. More people want their share of tendies. It seems like non clearing house members such as smaller banks and trading firms will now be able to take part in these member suspension auctions with just a member's sponsorship.

Additionally, there seems to be another purpose: The OCC wants this liquidation procedure to go as quickly as possible to perhaps lessen the blow on the market as a whole.

TLDR: The wolves are licking their chops to grab discount securities at auction following the perhaps inevitable liquidation of a major options clearing member. Citadel is a major options clearing member. People are getting ready to take their slice of the pie.
