Feb. 2, 2024
Once again, a self-regulatory organization (SRO) is requesting alterations to rules to avoid failure during "Market Volatility." I firmly oppose this proposal. It is high time for the SEC to fulfill its regulatory role and confront financial institutions that possess immense leverage without adequate safeguards in times of market volatility. The Options Clearing Corporation (OCC) seeks approval to sidestep addressing the risks posed by the overwhelming leverage employed by these institutions. The banking sector is already subject to few regulations, and removing them only amplifies the potential for irresponsible conduct. Rules are essential to curbing unchecked behavior. Margin requirements exist to prevent banks and other leveraged entities from overcommitting. The OCC, however, is tasked with guaranteeing these overly leveraged banks during margin calls, a task it deems impossible due to the vastness of the derivatives market, beyond even the Federal Reserve's capacity to cover. When deemed "too big to fail," banks are rescued by the American people. Yet, the people themselves are never considered "too big to fail." Instances like Bill Hwang's actions mirror those of banks, resulting in a margin call and subsequent legal consequences. In contrast, entities like Instinet, an OCC member, were granted a waiver exceeding 500 billion during a congressional hearing without being called to testify, despite being the largest defaulter. Anticipating the SEC vote on this proposal, I expect two supportive votes and recognize the critical role of the swing vote. To the swing vote: Understand your influence and ensure it benefits you. If you choose to compromise, demand a guarantee of personal wealth elevation. The inevitable post-SEC career transitions to prominent positions in banks or hedge funds, as often covered by the media, are well-known. In essence, as regulators, your duty is to regulate markets and establish rules to prevent volatility. This proposed rule change, however, only serves to increase margins. OCC members will continue to receive leniency during crises, as the OCC lacks the financial capacity to rescue even a single defaulting member, let alone all of them. SEC board members must remember they serve the American people who vote, pay taxes, and invest in markets that should be both free and fair. People see through schemes and unfair rules, and they know who is responsible. This rule change is unacceptable and must be rejected.