Goldman, BoA, Citadel clash with brokers over options clearing

Bank of America, Citadel Securities and Goldman Sachs Group have rallied in support of a controversial plan from the world’s largest options clearing house. Retail brokers warn the changes would add hundreds of millions of dollars in extra costs. Executives from the three firms backed a proposal from the Options Clearing, which would change how contributions to a pot of money that pays out in the event a clearing member goes bust are tallied up. They said the plan “reduces the likelihood of abrupt and destabilizing clearing fund reallocations during periods of market stress.”

“Clearing members whose activities drive growth in the size of the overall clearing fund today are not responsible for funding that increase,” wrote Stuart Bourne, co-head of global equities and global head of prime financing at BofA Securities; Stephen Berger, global head of government and regulatory policy at Citadel Securities; and Alicia Crighton, global co-head of futures and global head of clearing at Goldman Sachs.

The row is a sign of growing tensions between Wall Street and retail brokers over risk management amid the explosion in retail derivatives trading since the Covid pandemic, with the Options Clearing now handling trades worth about $4 trillion in notional value a day. The clearinghouse wants risk charges “more fairly” allocated among large banks and retail brokers such as Robinhood Markets and Charles Schwab, which have helped fuel a 130% increase in average daily volume to 69 million trades a day, according to the clearinghouse.