Feb. 28, 2024
Dear Members of the Securities and Exchange Commission, I am writing to express my deep reservations regarding Rule SR-OCC-2024-001, which suggests alterations to margin thresholds, especially in times of heightened volatility. Certain aspects of this rule pose crucial questions and introduce potential risks. The utilization of "idiosyncratic volatility control settings" to modify margin thresholds during periods of high volatility presents a risk due to its lack of transparency in the calculation and implementation process. The absence of clear guidelines on how these settings are determined may lead to arbitrary adjustments, potentially allowing the Options Clearing Corporation (OCC) to alter criteria whenever Clearing Members seek assistance. This flexibility raises obvious concerns about fairness, as it may create a scenario where rules can be changed based on individual circumstances, potentially favoring specific market participants or introducing an element of unpredictability. Such opacity undermines the integrity of financial markets by eroding trust among participants. Financial markets rely on clear and consistent rules applied uniformly to ensure a level playing field. When rules can be adjusted opaquely, it introduces 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 a key factor in upholding the integrity of the overall financial system. The supporting evidence for the proposal, especially regarding the calculation of margin thresholds, is concerning due to excessive redaction. This lack of disclosure undermines the principles of transparency and accountability crucial in regulatory frameworks. As stakeholders, we require detailed information on how these adjustments will be made to ensure fair and equitable treatment of 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. While this authority is ostensibly intended to protect the interests of the OCC, it raises questions about potential conflicts of interest. The FRM Officer is tasked with safeguarding both the OCC's interests and those of at-risk Clearing Members, creating a potential conflict that needs addressing. In consideration of 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 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, Jacob R. Summers