May 8, 2024
Dear SEC, I am writing as a participant in the retail investment sector to express my disapproval of the current proposition detailed in SR-OCC-2024-001 Release No 34-100009, specifically regarding the adjustment of margin requirements in volatile market conditions as outlined in the Options Clearing Corporation's rule change proposal (Federal Register). The primary concern lies with the evident obscurity presented in the published documents, notably Exhibits 3 and 5, which contain substantial redactions. This lack of transparency hinders effective public scrutiny and participation, which is critical in ensuring equitable market operations. Given the incomplete disclosure, I urge a rejection of the proposal until full details are made available for public evaluation. Furthermore, the proposal places undue reliance on U.S. regulatory bodies' discretion, overlooking the necessity for stringent, cyclical controls on margin requirements as practiced by international financial bodies. This oversight can lead to increased systemic risk during market stress, potentially compromising liquidity and stability for all clearing members, thus endangering the broader financial system, especially considering OCC’s role as a significant financial market utility (SIFMU). Additionally, the proposition’s approach to managing margin requirements seems to cater disproportionately to the needs of Clearing Members, potentially at the expense of overall market stability. By frequently adjusting margin requirements to prevent individual member defaults, the OCC might be inadvertently amplifying systemic risks, contradicting the very essence of robust financial oversight. The OCC's frequent recourse to "idiosyncratic" adjustments, as mentioned over 200 times since December 2019, raises questions about the sporadic application of these measures, suggesting a pattern that might not be as random as implied. This practice, coupled with "global" settings adjustments during critical events like the COVID-19 pandemic and significant market anomalies, indicates a reactive rather than proactive approach to financial risk management. Given these points, the proposed rule appears to create an unbalanced playing field, disadvantaging other market participants, including retail investors like myself, who are left to shoulder the burden of potential long-tail risks while certain members receive preferential treatment. Therefore, it is paramount that the rule undergoes substantial revision to align with principles of fairness, transparency, and stringent risk management, consistent with the SEC’s mission to maintain a stable and fair marketplace. To enhance the proposal, I recommend the following: Unrestricted public access to all supporting documentation for the proposal, including detailed justifications for redacted sections. Establishment of rigorous, transparent guidelines for the application of both idiosyncratic and global control settings to margin requirements. A review of the loss allocation process to ensure that it more equitably distributes financial risk among all participants, reinforcing the overall resilience of the financial system. Thank you for considering my viewpoint on this critical matter. I trust that the SEC will take the necessary steps to uphold the integrity and stability of our financial markets. Best regards, Eugene Garanin A Concerned Retail Investor since 2017