Who clears all premiums when an options contract is first written?

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Prepare for the General Securities Representative Exam. Study with flashcards and multiple choice questions, each question has hints and explanations. Get ready for your exam!

The correct answer is the Options Clearing Corporation (OCC). The OCC plays a crucial role in the options market by acting as the clearinghouse for all options trades. When an options contract is created, the OCC is responsible for ensuring that the terms of the contract are fulfilled. This includes clearing and settling all premiums associated with the options contracts when they are first written.

The OCC provides a layer of security in options trading by guaranteeing the performance of the contract, which reduces counterparty risk and facilitates smooth trading operations. This means that when an options contract is initiated, it is the OCC that calculates and collects the initial premium from the buyer and ensures that the premium is properly credited to the seller of the contract.

Other entities like FINRA, the SEC, and the NYSE do play significant roles in the regulation and oversight of securities markets, but they do not directly handle the clearing and settlement of options premiums. FINRA is primarily focused on regulating broker-dealer firms, the SEC oversees securities markets and protects investors, while the NYSE is an exchange where securities are bought and sold. Thus, the OCC's specific task related to options contract premiums makes it the correct entity in this context.

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