May 9, 2024
I, a retail investor, voice my support for the SEC’s potential disapproval of the Options Clearing Corporation's (OCC) proposed rule SR-OCC-2024-001 34-99393, due to several concerns. The proposal seeks to adjust parameters for calculating margin requirements in volatile market conditions but lacks sufficient transparency, evidenced by significant redactions that hinder meaningful public review. This lack of transparency alone justifies rejection of the proposal. The rule blames U.S. regulators for not implementing controls that would mitigate procyclicality — a situation where margin increases during market stress, potentially causing liquidity issues for clearing members and exposing the OCC to financial risk. This proposed adjustment seems to primarily serve to alleviate potential losses for clearing members by reducing margin requirements, thereby increasing risks to the financial system. The OCC's approach involves using both idiosyncratic and global control settings to reduce margin requirements, an action taken over 200 times in less than four years. This frequent application suggests a systemic issue rather than isolated incidents, thus increasing the potential for a systemic financial crisis. The proposal also includes provisions that could unfairly shift the financial burden of clearing member defaults onto non-bank entities, like pension funds and insurance companies, potentially leading to significant economic consequences. Given the proposal’s potential to exacerbate financial instability by inadequately managing risks associated with clearing member positions and failing to maintain equitable market conditions, it should be rejected. Moreover, the rule could perpetuate a 'rules for thee, but not for me' situation, contradicting the SEC's mission to uphold fair market practices. Recommendations: Enforce stricter margin requirements that accurately reflect risks. Implement external auditing and enhanced public reporting for transparency. Reorder the OCC’s Loss Allocation Waterfall to better protect non-defaulting members and the clearing agency itself. Proactively manage and liquidate high-risk clearing members to minimize systemic risks. Increase market resiliency by introducing competitive clearing agencies and reducing single points of failure. Thank you for the opportunity to comment and contribute to a fair, transparent, and resilient market. Sincerely, A Concerned Retail Investor