Options Markets Stability Act

Bill: 115-hr-5749
Sponsor: full_name: Rep. Hultgren, Randy [R-IL-14]
Introduced: 2018-05-10
Policy area: Finance and Financial Sector
Subjects: Bank accounts, deposits, capital

Congressional oversight

Financial services and investments

Government studies and investigations

Securities
Latest action: action_date: 2018-07-11
text: Received in the Senate and Read twice and referred to the Committee on Banking, Housing, and Urban Affairs.

Summaries:
action_date: 2018-05-10
action_desc: Introduced in House
text: <p><b>Options Markets Stability Act</b></p> <p>This bill&nbsp;revises the method of calculating the risk, for purposes of&nbsp;satisfying capital rules applicable to depository institutions and depository institution holding companies,&nbsp;of&nbsp;certain options cleared through a central counterparty. </p>

tv_txt: I 115th CONGRESS 2d Session H. R. 5749 IN THE HOUSE OF REPRESENTATIVES May 10, 2018 Mr. Hultgren introduced the following bill; which was referred to the Committee on Financial Services A BILL To require the appropriate Federal banking agencies to increase the risk-sensitivity of the capital treatment of certain centrally cleared options, and for other purposes.

1. Short title This Act may be cited as the Options Markets Stability Act . 2. Credit exposure for guarantees of centrally cleared options (a) Definitions In this section, the terms affiliate , appropriate Federal banking agency , depository institution , and depository institution holding company have the meanings given those terms, respectively, in section 3 of the Federal Deposit Insurance Act ( 12 U.S.C. 1813 ). (b) Treatment of certain centrally cleared option derivatives exposures For purposes of calculating the counterparty credit risk exposure of a depository institution, depository institution holding company, or affiliate thereof, to a client arising from a guarantee provided by the depository institution, depository institution holding company, or affiliate thereof to a central counterparty in respect of the client’s performance under a derivative contract cleared through that central counterparty pursuant to the risk-based and leverage-based capital rules applicable to depository institutions and depository institution holding companies under parts 3, 217, and 324 of title 12, Code of Federal Regulations, the term effective notional principal amount with respect to such centrally cleared derivative contract means the hypothetical on-balance sheet position in the underlying asset that would evidence the same change in fair value (measured in dollars) given a small change in the price of the underlying asset. (c) Calculation of exposure for centrally cleared derivatives For purposes of calculating the counterparty credit risk exposure of a depository institution, depository institution holding company, or affiliate thereof to a client arising from a guarantee provided by the depository institution, depository institution holding company, or affiliate thereof to a central counterparty in respect of the client’s performance under a derivative contract cleared through that central counterparty pursuant to the risk-based and leverage-based capital rules applicable to depository institutions and depository institution holding companies under parts 3, 217 and 324 of title 12, Code of Federal Regulations, the offsetting nature of significantly and reliably correlated positions within a netting set must be reflected in a manner consistent with the risk offsets provided by the central counterparty.

tv_txt: I 115th CONGRESS 2d Session H. R. 5749 IN THE HOUSE OF REPRESENTATIVES AN ACT To require the appropriate Federal banking agencies to increase the risk-sensitivity of the capital treatment of certain centrally cleared exchange-listed options and derivatives, and for other purposes.

1. Short title This Act may be cited as the Options Markets Stability Act . 2. Rulemaking Within 180 days of the date of enactment of this Act, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, and the Comptroller of the Currency shall, jointly, issue a proposed rule, and finalize such rule within 360 days of the date of enactment of this Act, to adopt a methodology for calculating the counterparty credit risk exposure, at default, of a depository institution, depository institution holding company, or affiliate thereof to a client arising from a guarantee provided by the depository institution, depository institution holding company, or affiliate thereof to a central counterparty in respect of the client's performance under an exchange-listed derivative contract cleared through that central counterparty pursuant to the risk-based and leverage-based capital rules applicable to depository institutions and depository institution holding companies under parts 3, 217, and 324 of title 12, Code of Federal Regulations. In issuing such rule, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, and the Comptroller of the Currency shall consider— (1) the availability of liquidity provided by market makers during times of high volatility in the capital markets; (2) the spread between the bid and the quote offered by market makers; (3) the preference for clearing through central counterparties; (4) the safety and soundness of the financial system and financial stability, including the benefits of central clearing; (5) the safety and soundness of individual institutions that may centrally clear exchange-listed derivatives or options on behalf of a client, including concentration of market share; (6) the economic value of delta weighting a counterparty’s position and netting of a counterparty’s position; (7) the inherent risk of the positions; (8) barriers to entry for depository institutions, depository institution holding companies, affiliates thereof, and entities not affiliated with a depository institution or depository institution holding company to centrally clear exchange-listed derivatives or options on behalf of market makers; (9) the impact any changes may have on the broader capital regime and aggregate capital in the system; and (10) consideration of other potential factors that impact market making in the exchange-listed options market, including changes in market structure. 3. Report to Congress At the end of the 5-year period beginning on the date the final rule is issued under section 2, the Board of Governors of the Federal Reserve System shall submit to the Committee on Financial Services of the House of Representatives and the Committee on Banking, Housing, and Urban Affairs of the Senate a report detailing the impact of the final rule during such period on the factors described under paragraphs (1) through (10) of section 2.

Passed the House of Representatives July 10, 2018. Karen L. Haas, Clerk.

tv_txt: IIB 115th CONGRESS 2d Session H. R. 5749 IN THE SENATE OF THE UNITED STATES July 11, 2018 Received; read twice and referred to the Committee on Banking, Housing, and Urban Affairs AN ACT To require the appropriate Federal banking agencies to increase the risk-sensitivity of the capital treatment of certain centrally cleared exchange-listed options and derivatives, and for other purposes.

1. Short title This Act may be cited as the Options Markets Stability Act . 2. Rulemaking Within 180 days of the date of enactment of this Act, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, and the Comptroller of the Currency shall, jointly, issue a proposed rule, and finalize such rule within 360 days of the date of enactment of this Act, to adopt a methodology for calculating the counterparty credit risk exposure, at default, of a depository institution, depository institution holding company, or affiliate thereof to a client arising from a guarantee provided by the depository institution, depository institution holding company, or affiliate thereof to a central counterparty in respect of the client's performance under an exchange-listed derivative contract cleared through that central counterparty pursuant to the risk-based and leverage-based capital rules applicable to depository institutions and depository institution holding companies under parts 3, 217, and 324 of title 12, Code of Federal Regulations. In issuing such rule, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, and the Comptroller of the Currency shall consider— (1) the availability of liquidity provided by market makers during times of high volatility in the capital markets; (2) the spread between the bid and the quote offered by market makers; (3) the preference for clearing through central counterparties; (4) the safety and soundness of the financial system and financial stability, including the benefits of central clearing; (5) the safety and soundness of individual institutions that may centrally clear exchange-listed derivatives or options on behalf of a client, including concentration of market share; (6) the economic value of delta weighting a counterparty’s position and netting of a counterparty’s position; (7) the inherent risk of the positions; (8) barriers to entry for depository institutions, depository institution holding companies, affiliates thereof, and entities not affiliated with a depository institution or depository institution holding company to centrally clear exchange-listed derivatives or options on behalf of market makers; (9) the impact any changes may have on the broader capital regime and aggregate capital in the system; and (10) consideration of other potential factors that impact market making in the exchange-listed options market, including changes in market structure. 3. Report to Congress At the end of the 5-year period beginning on the date the final rule is issued under section 2, the Board of Governors of the Federal Reserve System shall submit to the Committee on Financial Services of the House of Representatives and the Committee on Banking, Housing, and Urban Affairs of the Senate a report detailing the impact of the final rule during such period on the factors described under paragraphs (1) through (10) of section 2.

Passed the House of Representatives July 10, 2018. Karen L. Haas, Clerk.

tv_txt: IB Union Calendar No. 629 115th CONGRESS 2d Session H. R. 5749 [Report No. 115–810] IN THE HOUSE OF REPRESENTATIVES May 10, 2018 Mr. Hultgren introduced the following bill; which was referred to the Committee on Financial Services July 10, 2018 Additional sponsor: Mr. Foster July 10, 2018 Reported with an amendment, committed to the Committee of the Whole House on the State of the Union, and ordered to be printed Strike out all after the enacting clause and insert the part printed in italic For text of introduced bill, see copy of bill as introduced on May 10, 2018 A BILL To require the appropriate Federal banking agencies to increase the risk-sensitivity of the capital treatment of certain centrally cleared options, and for other purposes.

1. Short title This Act may be cited as the Options Markets Stability Act . 2. Rulemaking Within 180 days of the date of enactment of this Act, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, and the Comptroller of the Currency shall, jointly, issue a proposed rule, and finalize such rule within 360 days of the date of enactment of this Act, to adopt a methodology for calculating the counterparty credit risk exposure, at default, of a depository institution, depository institution holding company, or affiliate thereof to a client arising from a guarantee provided by the depository institution, depository institution holding company, or affiliate thereof to a central counterparty in respect of the client's performance under a derivative contract cleared through that central counterparty pursuant to the risk-based and leverage-based capital rules applicable to depository institutions and depository institution holding companies under parts 3, 217, and 324 of title 12, Code of Federal Regulations. In issuing such rule, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, and the Comptroller of the Currency shall consider— (1) the availability of liquidity provided by market makers during times of high volatility in the capital markets; (2) the spread between the bid and the quote offered by market makers; (3) the preference for clearing through central counterparties; (4) the safety and soundness of the financial system and financial stability, including the benefits of central clearing; (5) the safety and soundness of individual institutions that may centrally clear derivatives or options on behalf of a client, including concentration of market share; (6) the economic value of delta weighting a counterparty’s position and netting of a counterparty’s position; (7) the inherent risk of the positions; (8) barriers to entry for depository institutions, depository institution holding companies, affiliates thereof, and entities not affiliated with a depository institution or depository institution holding company to centrally clear derivatives or options on behalf of market makers; (9) the impact any changes may have on the broader capital regime and aggregate capital in the system; and (10) consideration of other potential factors that impact market making in the options market, including changes in market structure. 3. Report to Congress At the end of the 5-year period beginning on the date the final rule is issued under section 1, the Board of Governors of the Federal Reserve System shall submit to the Committee on Financial Services of the House of Representatives and the Committee on Banking, Housing, and Urban Affairs of the Senate a report detailing the impact of the final rule during such period on the factors described under paragraphs (1) through (10) of section 2.

July 10, 2018 Reported with an amendment, committed to the Committee of the Whole House on the State of the Union, and ordered to be printed