Feb. 7, 2024
Thank you for the opportunity to provide feedback on SR-OCC-2024-001 34-99393 titled "Proposed Rule Change by The Options Clearing Corporation Concerning Its Process for Adjusting Certain Parameters in Its Proprietary System for Calculating Margin Requirements During Periods When the Products It Clears and the Markets It Serves Experience High Volatility". I have several concerns regarding the OCC rule proposal and strongly oppose it. I do not support its approval. One of my main concerns is the lack of transparency within our financial system, as demonstrated by this rule proposal and others. The proposal contains heavily redacted details and supporting information, which hinders public review. This lack of transparency makes it impossible for the public to thoroughly assess and provide meaningful comments on the proposal. Therefore, I believe this proposal should be rejected solely based on this issue. Furthermore, these rules create an unfair marketplace for market participants, particularly retail investors. They are forced to bear the consequences of long-tail risks while the OCC repeatedly waives margin calls for Clearing Members by reducing their margin requirements. This discrepancy puts retail investors at a disadvantage. To ensure fairness, this rule proposal should be rejected, and Clearing Members should be subject to the same strictly defined margin requirements as other investors. According to the OCC, this rule proposal and the special margin reduction procedures are in place to mitigate the potential financial risk resulting from a single Clearing Member defaulting, which could trigger a cascade of defaults. However, this approach effectively treats Clearing Members as "Too Big To Fail" entities, as they are not held accountable for properly managing their portfolio risk against long-tail events. To address this issue, I believe the rule proposal should be rejected, and Clearing Members should face the consequences of inadequate risk management, including exposure to long-tail events. Clearing Member failure serves as a natural disincentive against excessive leverage and insufficient capitalization, as the market will not cover their losses. In summary, this rule proposal should be rejected due to its lack of transparency and the unfair advantage it provides to Clearing Members. Clearing Members should be held accountable for managing their portfolio risk, and the proposal should not codify an inh. Thanks, Jeffery Norville