The US options market is on track to mark its sixth consecutive year of record trading volume, but concerns are mounting among industry leaders over the system's dependence on a limited number of banks to guarantee trades by major market makers.

All listed US options trades are processed through The Options Clearing Corp. (OCC), a central counterparty that manages over 70 million contracts on busy days. OCC relies on its members, who serve as intermediaries for trades and act as guarantors in case of client defaults.

However, the industry's reliance on a few key firms is significant. In the second quarter of 2025, the top five contributors to OCC’s default fund accounted for nearly half of its capital. Prominent industry names such as Bank of America Corp., Goldman Sachs Group Inc., and ABN Amro Bank NV dominate the handling of market maker positions, which constitutes the majority of options trades. The dependence on such a small group heightens the systemic risk of market upheaval should any one of these firms encounter operational disruptions.

“There is significant concentration risk in clearing intermediation,” said Craig Donohue, CEO of Cboe Global Markets Inc., during an interview. While he refrained from naming specific banks, he acknowledged the concerns. “I do worry about that,” he said.

The failure of a major bank remains an improbable yet plausible event. Donohue recalls a past experience with this scenario, pointing back to October 2011, when MF Global filed for bankruptcy while he was CEO of CME Group Inc., leaving a mark on the clearing landscape.

A more pressing concern lies in the ability of these banks to sustain the exponential growth in the listed derivatives market. In October, OCC’s average daily volume surged by 52% compared to the previous year. This has pushed market makers toward “self-clearing,” where they become direct members of OCC. However, this trend carries its own risks, as market makers generally lack the robust capitalization that banks possess.

Requests for comments were declined by Bank of America and Goldman Sachs, while ABN Amro did not provide a response.

Moreover, only a small pool of clearing brokers can facilitate cross-margining between futures and options, a process that offsets opposing positions in related instruments to reduce margin requirements. For instance, a trader long on S&P 500 E-Mini Futures and simultaneously shorting S&P 500 Index Options could lower their net risk position. “Only a few members currently support market makers, especially for cross-margin programs,” said Andrej Bolkovic, OCC's CEO. He added that there is significant industry demand for broader access to such features, a stance OCC supports.

Banks sometimes face additional challenges due to capital regulations. While clearinghouses may allow a discount based on net risk, banks’ internal capital frameworks often require them to treat such net positions separately, resulting in higher costs.

Patchwork Regulation

The fragmented US regulatory environment exacerbates these challenges. Banks fall under the Federal Reserve System, broker-dealers and options markets are governed by the Securities and Exchange Commission (SEC), while futures—including equity futures—are regulated by the Commodity Futures Trading Commission (CFTC). This patchwork system can lead to situations where banks extend cross-margin benefits to customers but still need to allocate separate reserves to back these trades.

New trading trends, such as the rise of zero-day-to-expiry options and surging retail trading volumes, are creating additional strains for clearing members. Industry discussions around 24/7 trading could further stress clearing systems and raise operational costs, making it harder for other firms to enter the market. Increased investments in technology and capacity are inevitable, costs that clearing members are likely to transfer to their clients. Bank of America, for instance, has already raised its options clearing charges, reportedly increasing per-trade fees from $0.02–$0.03 to as high as $0.04.

Default Fund Evolution

To address risks, OCC has proposed adjustments to how it calculates individual member contributions to its approximately $20 billion default fund. Currently, 70% of the allocation is based on how a clearing member would fare during a roughly 5% market movement. OCC is seeking SEC approval to adopt a more stringent measure, simulating extreme market events such as the 1987 crash when the Dow Jones Industrial Average plunged 22.6% in a single day.

Craig Donohue emphasized that these efforts underscore the clearinghouse’s commitment to mitigating risks. “The regulatory and operational structure has evolved to better manage such challenges,” he noted. Formerly OCC’s chairman (2014-2025), Donohue advocates for greater participation by additional institutions in the clearing process.

“If we could wave a magic wand and introduce more competition along with diversified and dispersed clearing capacity, it would undoubtedly benefit the market,” he remarked.