Feb. 3, 2024
I strongly oppose the proposed rule change outlined in SR-OCC-2024-001 by the Options Clearing Corporation (OCC). The redaction of details in the proposal raises concerns, hindering public review and transparency. The attribution of the need for adjustments to regulatory failures overlooks market participant abuses, including excessive naked shorting. The proposed margin reduction for Clearing Members may heighten risks for the OCC and the financial system. Over 200 instances of “idiosyncratic” control settings in less than four years raise concerns about consistency and impact on market integrity. The rules create an uneven playing field, benefiting Clearing Members and posing potential risks to the financial system. The role of the Financial Risk Management Officer raises questions about impartiality. I propose the following modifications: 1. Increase and enforce margin requirements to align with Clearing Member risks. 2. Introduce external auditing for transparency and proactive risk management. 3. Modify the Loss Allocation waterfall to prioritize non-defaulting firms’ deposits. These recommendations aim to address concerns and contribute to a more transparent and stable market environment. I urge the SEC to reconsider the proposed rule, considering its implications. Yours faithfully, Steve Hagaman