M
any companies have drawn
down on revolving bank credit
facilities to get their hands on
much-needed cash. But Amy Shelly, CFO
of the Chicago-based Options Clearing
Corporation (the OCC), the world’s larg-
est equity derivatives clearing organiza-
tion, faced a different problem during the
pandemic: She was sitting on too much
cash as a result of an explosion in clearing
volumes. “What we saw was record vola-
tility and capital flows, which caused our
volumes to skyrocket,” she says. “As vol-
umes increased, open positions and mar-
gins increased. Our cash balances went up
twentyfold in March, which put strain on
our banking partners. My treasurer and I
were on the phone with our banks every
day trying to understand how much cash
they could take.”
Over 95% of the OCC’s revenue is
derived from the clearing fee it charges
members, and Shelly had budgeted for
19 million contracts to be cleared a day.
Then the pandemic struck, and that shot
up to an average of 28 million contracts.
Shelly couldn’t invest all of the excess cash
because her counterparties only had so
much capacity. Her only alternative was
to park it with her banking partners. “Our
settlement banks had potential constraints
in terms of how much cash they could
hold,” she explains. “But we were able toget many of them to hold a certain value
of money during high-volume days.”
As a Systemically Important Financial
Market Utility (SIFMU), Shelly has a fully
secured credit line available to her, which
acts as an insurance policy in the event of
a clearing member defaulting. “We’ve put
a lot of work into building our bank rela-
tionships,” she explains. “But we don’t just
look at those relationships through the lens
of our bank credit facility. We’re looking
for other business as well, and how we can
be mutually beneficial to one another.”
Those banking relationships served
Shelly well when it came time to renew
the OCC’s credit facility this summer.
“What we saw with certain industries
slowing down during the pandemic was
that companies were drawing down on
credit facilities, so banks had less capac-
ity,” says Shelly. “We were very engaged
with the banks in terms of which banks
were able to participate, and which ones
weren’t. Luckily, we were able to add two
banks and retain one bank that initially
indicated they were going to step away.”
As the economic impact of the pan-
demic continues to play out, Shelly says
it is likely to cost more for companies
to secure credit lines. “There will be a
shift away from unsecured credit, at larger
dollar amounts than are done today,” she
says. CFOs are also looking to shore upalternative sources of liquidity. “In June,
we closed two transactions with pension
funds for two secured credit lines,” says
Shelly, “and we’re in the process of devel-
oping other relationships with pension
funds and insurance companies. We’re
looking outside of financial services for
an alternative. We need to ensure we can
still operate and provide resiliency, secu-
rity and stability to market participants.”
Since becoming CFO four years ago,
Shelly has overseen rollout of a new enter-
prise resource planning system, which has
helped the business reduce its month-end
financial closing from 15 days to five. “We
expanded our use of ACH payments, so we
didn’t have to worry about printing checks
during the pandemic,” Shelly explains. “A
lot of the planning we’d put in place [pre-
Covid] has made our lives less complicated.”
The OCC is also implementing a new
treasury management system (TMS).
“Instead of accessing our banks through
their individual web portals, we’ll be able
to manage everything in one place throughthe TMS, cutting down on the amount
of work we need to do to connect to our
banks.” But she isn’t ready to dispense with
spreadsheets altogether. “Spreadsheets
aren’t a bad thing,” says Shelly. “We want to
automate where it’s smart. We don’t want
to unnecessarily increase the complexity of
our technology stack.” ■Awash In Cash
With derivatives contracts soaring due to the
pandemic, so did OCC’s cash balance.
By Anita HawserAmy Shelly, CFO of Options Clearing
Corporation51CORPORATE TREASURY SUPPLEMENT 2020 |^ CFO INSIGHTS