Feb. 7, 2024
I am writing to provide feedback on the proposed rule change by The Options Clearing Corporation (OCC) concerning its process for adjusting certain parameters in its proprietary system for calculating margin requirements during periods of high volatility, as outlined in document SR-OCC-2024-001 34-99393. As a retail investor, I have several concerns about the OCC rule proposal and do not support its approval. Firstly, I am troubled by the lack of transparency surrounding this rule proposal. The significant redaction of details in Exhibit 5 and supporting information in Exhibit 3 inhibits public review and prevents meaningful commentary on the proposal. Transparency is essential for ensuring public trust and confidence in our financial system, and without it, this proposal should not proceed. Furthermore, the OCC's reliance on reducing margin requirements as a means of managing risk is concerning. This approach appears to prioritize the interests of Clearing Members over the stability of the financial system as a whole. By repeatedly waiving margin calls for Clearing Members, the OCC creates an unfair marketplace for other participants, including retail investors like myself, who are left to bear the risks. Additionally, the proposed rule codifies a conflict of interest for the Financial Risk Management (FRM) Officer, whose role should be to protect the OCC's interests. Instead, the FRM Officer is put in the position of safeguarding Clearing Members from failure, undermining the effectiveness of margin collateral in mitigating market risks. In light of these concerns, I urge you to consider the following modifications to the rule proposal: Increase and enforce margin requirements commensurate with the risks associated with Clearing Member positions. Implement external auditing and supervision to enhance risk management practices and ensure transparency. Swap the order of loss allocation in the OCC's Loss Allocation waterfall to prioritize the protection of Clearing Member deposits before OCC's own pre-funded financial resources. These modifications would promote a fair, transparent, and resilient market environment that benefits all investors. I believe that by addressing these issues, we can work towards a stronger and more stable financial system. I appreciate the opportunity to share my thoughts and thank you for considering my feedback. Regards, Michael Craighill