Mar. 3, 2024
Hello, Thank you for taking the time to read my comment on the proposed SR-OCC-2024-001 rule. Overall, I do not support the proposed rule. All this rule ensures/promotes a "too Big to Fail" mentality for Clearing Members. Allowing the OCC to adjust margin(s) thresholds during high market volatility seems like a cheap way to ensure they can control the market.... you know, the "fair and free market" the SEC is always touting. Allowing to adjust margin requirements when they feel like it gives the privilege to Wall Street to make risky bets and then get saved if those risky bets fail. It is also strange that the document accompanying the proposed rule is heavily redacted and omits key information on how the new rule will work. I suspect this is intentional -- don't want to shed light on dirty dealings already in play. How is the public supposed to understand the proposed rule if the majority of the information is blocked out? In doing research for this comment I came across the following: Strengthen and enforce margin requirements to align with Clearing Member risks, discouraging a "Too Big To Fail" strategy that could pressure the OCC, privatize profits, and socialize losses. Introduce external auditing and supervision as a "fourth line of defense" for enhanced transparency and proactive risk management with public reporting. Incorporate public input through consultations and hearings in the rule-making process for inclusive and representative regulatory actions. Advocate for public accessibility of stress testing results to showcase risk management effectiveness and build trust among market participants. Consider establishing an external oversight committee of industry experts, academics, and investor advocacy representatives for impartial evaluation of risk management practices. Reorder the Loss Allocation waterfall, prioritizing Clearing fund deposits of non-defaulting firms over OCC's pre-funded financial resources and the EDCP Unvested Balance to foster self-regulation among Clearing Members. Enhance transparency requirements, ensuring clear and accessible disclosure in reporting and decision-making processes related to risk management measures. Strengthen oversight mechanisms, involving regulatory bodies more actively to maintain accountability and address emerging risks during periods of heightened market volatility. Provide clear guidelines for the application of idiosyncratic controls, preventing misuse, and proposing a structured evaluation framework for consistency and full disclosure for public review. Consider establishing an external oversight committee comprised of industry experts, academics, and investor advocacy representatives for impartial evaluation and scrutiny of risk management practices This list is a vast improvement from the lazy proposed rule. Implementing some (or all) of these would help accountability and transparency within the OCC and ensure a more stable market overall. Thank you for reading and I look forward to seeing some improvements on this proposed rule.