We receive close prices from the following sources:
- Stocks: Telekurs (US stocks) and Bloomberg (European and Asian stocks)
- Options: OCC
- Futures: directly from the clearinghouse (CME, EUREX, OCC, CLEARNET, etc.)
- Bonds: Bloomberg (TRACE and BVAL)
- FX rates: Reuters
For options, OCC generates a closing price for each option contract in order to calculate the margin required of its members on whose behalf it clears transactions (e.g. IB) and also to supply the risk arrays used by brokers carrying portfolio margin accounts.
It’s important to note that prices generated by OCC are edited and therefore may not reflect the closing price as disseminated by any of its participant exchanges. They are edited primarily due to the fact that there is no consolidated quote provided for options, most of which are multiply listed and fungible across all seven exchanges. As a result, OCC creates a single price as of the close which is theoretically consistent across all exchanges and reviewed to ensure that there are no arbitrage conditions across strikes or time.
In creating prices, OCC will start by taking the mid-point of the highest bid and lowest ask price across all listing exchanges, determining the implied volatility and then smoothing the implied volatility curve through an iterative process which, in turn, adjusts the option mark prices. There are also rules enforced to cap volatility for certain deep in and deep out of the money options. The resulting smoothed price is extended out to six decimal places. Due to the operational overhead of computing edited prices for the complete universe of option series, this price smoothing process is performed only once per day as of the market close.