Feb. 25, 2024
Dear Members of the Securities and Exchange Commission, I am writing to share my apprehensions about Rule SR-OCC-2024-001, which proposes alterations to margin thresholds, specifically in times of heightened volatility. Certain aspects of this rule prompt crucial questions and introduce potential risks. The utilization of "idiosyncratic volatility control settings" for adjusting margin thresholds during periods of high volatility poses a risk due to its lack of transparency in the calculation and implementation process. Without clear guidelines on how these settings are determined, there is a possibility of arbitrary adjustments, allowing the Options Clearing Corporation (OCC) to modify the criteria whenever Clearing Members require assistance. This flexibility raises fairness concerns, as it may create a scenario where rules can be changed based on individual circumstances, potentially favoring specific market participants or introducing unpredictability. The absence of transparency undermines the financial markets' integrity by eroding trust among participants. Financial markets rely on clear, consistent rules applied uniformly to ensure a level playing field. When rules can be adjusted opaquely, it creates uncertainty and diminishes confidence in the regulatory framework. Maintaining trust is crucial for the effective functioning of financial markets, and transparency in rule-making and enforcement is pivotal for upholding the overall financial system's integrity. The supporting evidence of the proposal, especially regarding the calculation of margin thresholds, is disconcertingly redacted. This lack of disclosure undermines the principles of transparency and accountability crucial in regulatory frameworks. As stakeholders, we need detailed information on how these adjustments will be made to ensure fair and equitable treatment for all market participants. Furthermore, the proposal grants unchecked authority to the Financial Risk Management (FRM) Officer to make unilateral decisions during periods of high market stress. This authority, ostensibly intended to protect the OCC's interests, raises questions about potential conflicts of interest. The FRM Officer is entrusted with safeguarding both the OCC's interests and those of at-risk Clearing Members, creating a potential conflict that needs addressing and changing. Given these concerns, I urge the Securities and Exchange Commission to thoroughly review and reconsider the implications of Rule SR-OCC-2024-001. Clear guidelines, transparency in calculations, and checks and balances on discretionary authority are essential for maintaining the integrity and stability of the financial markets. Thank you for your attention to this matter. I trust that the SEC will carefully consider these concerns and take appropriate actions to address the potential risks associated with this rule. Sincerely, J. Giampaolo