May 5, 2024
As a retail investor, I value the opportunity provided by SR-OCC-2024-001 Release No 34-100009 to express my views 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" (Federal Register). I am in agreement with the SEC's grounds for potential disapproval due to significant concerns I have with the OCC's rule proposal. I believe that this proposal does not warrant approval and I appreciate the opportunity to contribute to the rulemaking process, ensuring fair, orderly, and efficient markets for all investors. My primary concern lies in the lack of transparency within our financial system, exemplified by this rule proposal among others. The redacted details within Exhibit 5, along with supporting information (see Exhibit 3), impede public review, rendering meaningful feedback and commentary impossible. This deficiency alone warrants rejection of the proposal. Public review is particularly crucial given that the OCC's Proposed Rule shifts accountability to U.S. regulators for not mandating the adoption of prescriptive procyclicality controls seen in other jurisdictions. The proposal suggests that increasing margin requirements during times of market stress may threaten stability and expose the OCC to financial risks from member defaults. As the OCC operates as a SIFMU (Systemically Important Financial Market Utility), essential for U.S. financial stability, transparency is imperative. Blaming U.S. regulators for lacking protective measures reveals an unsettling reliance on the OCC and regulatory entities. This rule proposal appears designed to shield Clearing Members from potential trading losses by habitually reducing margin requirements based on Clearing Members' requests, thereby heightening risks for the OCC and our financial system's stability. The OCC's assertion that implementing idiosyncratic and global control settings resulted in a substantial decrease in aggregate margin requirements underscores the need for stricter, universally applicable margin standards to ensure a level playing field for all market participants. The proposed rule change further amplifies systemic risks by minimizing margin requirements for at-risk Clearing Members while maintaining unjustifiable levels of risk exposure. The OCC's motivation to reduce margin requirements disregards the interests of other market participants, including retail investors, who bear the brunt of long-tail risks without similar reprieves. In essence, the rule proposal promotes an inequitable marketplace where Clearing Members evade accountability for risky behaviors, while other participants, including retail investors, remain vulnerable to market fluctuations. Approval of this proposal would perpetuate inequality within our financial system, contradicting the SEC's mandate to uphold fair market practices. Given the grave implications outlined above, I recommend the following: Enforce and increase margin requirements to align with Clearing Members' risk exposures. Implement external audits and oversight to enhance transparency and risk management. Review and revise the OCC's loss allocation structure to prioritize non-defaulting firms' contributions to the clearing fund. Facilitate immediate suspension and liquidation of Clearing Members whose losses exceed margin deposits to mitigate systemic risks promptly. Address "single points of failure" by diversifying and fortifying our financial infrastructure. Thank you for considering my input, aimed at safeguarding the interests of all investors in our financial markets. Sincerely, A Concerned Retail Investor