US Options Market Faces ‘Concentration Risk’ Over Bank Reliance

The rapid expansion of the US options market, coupled with the concentration of clearing activity among a limited number of firms, underscores the importance of robust risk management and a diversified clearing landscape. The OCC maintains a default fund of approximately $20 billion to cover losses if one or more of its largest members were to fail. Craig Donohue, the chief executive officer of Cboe Global Markets, Inc., has voiced significant apprehension about this concentration risk, describing it as “significant concentration risk in clearing intermediation.” He notes a genuine concern that the system could be vulnerable. Donohue’s own experience serves as a stark reminder of the potential consequences. In October 2011, while CEO of CME Group Inc., the financial firm MF Global declared bankruptcy, triggering a serious disruption. The immediate risk isn’t simply the potential failure of a major bank, though that is an unlikely scenario – it’s the possibility that these institutions might be unable to sustain the extraordinary growth of the listed derivatives market. Average daily volume at the OCC has soared by 52% since October of the previous year, reaching a significant level. This spike in activity is pushing market makers to adopt “self-clearing” practices, meaning they become direct members of the clearing house. This shift presents additional risk because market makers are typically more thinly capitalized than the large banks. Banks are overseen by the Federal Reserve System, while securities markets fall under the purview of the Securities and Exchange Commission (SEC). Futures markets, including equity futures, are regulated by the Commodity Futures Trading Commission (CFTC). The OCC wants to incorporate a more severe scenario, such as the 1987-style market crash when the Dow Jones Industrial Average plunged 22.6% in a day, signifying a more robust risk assessment framework. Clearing houses’ ongoing vigilance, a characteristic of the regulatory and operational paradigm, represents a crucial sign of strength. Donohue, who served as OCC chairman from 2014 to 2025, has repeatedly emphasized the benefit of increased competition within the options clearing space. "If we could wave a magic wand and we could have more competition in that space, more clearing capacity, that was more distributed and dispersed and diverse, that would clearly be very beneficial for the market,” he stated. The industry’s cautious optimism, driven by the OCC’s proactive approach and a global market increasingly reliant on the efficiency and reliability of options trading, suggests a pathway forward—one where innovation and careful risk management coalesce to support continued growth and stability.