May 14, 2024
I am writing to express my support for the Securities and Exchange Commission's (SEC) recent decision to reject the Options Clearing Corporation's (OCC) proposed rule change. The SEC's disapproval aligns with fundamental principles that are essential for maintaining the integrity and stability of our financial markets: transparency, risk mitigation, and investor protection. Firstly, transparency is a cornerstone of a fair and efficient financial market. The OCC's proposed rule change lacked sufficient transparency, particularly in how it intended to manage and disclose critical information regarding margin requirements and risk assessments. Transparent processes ensure that all market participants have equal access to vital information, fostering a level playing field. The absence of clear, accessible information in the OCC's proposal could have undermined investor confidence and potentially led to misinformation or misinterpretation of the OCC's risk management practices. Secondly, the proposal raised significant concerns about systemic risk, particularly regarding the adjustment of margin requirements during periods of market volatility. It is well-documented that margin requirements play a critical role in maintaining market stability. Sudden or inadequately explained adjustments to these requirements could exacerbate market volatility, creating a feedback loop that heightens systemic risk. The financial markets depend on predictable and stable margin requirements to manage liquidity and maintain orderly trading conditions. The lack of detailed explanations and justifications for these adjustments in the OCC's proposal was a glaring oversight that could have posed severe risks to market stability. Moreover, the proposed rule change presented a clear conflict of interest in the role of the Financial Resource Management (FRM) Officer. Granting excessive discretionary power to the FRM Officer without adequate checks and balances compromises the objectivity required for this role. The potential for conflicts of interest, whether perceived or actual, undermines the credibility of the risk management framework and could lead to decisions that do not prioritize the broader market's interests. It is imperative that such roles remain free from conflicts to ensure decisions are made impartially and with the highest integrity. Fairness and equal application of rules are also paramount. Ensuring that all participants are subject to the same rules and obligations, without exceptions, maintains trust in the system. The principle that everyone should pay what they owe, irrespective of their size or influence, is fundamental to the credibility and fairness of our financial markets. Any deviation from this principle could lead to a perception of favoritism or inequality, eroding the trust that is essential for market functioning. The SEC's decision to reject the OCC's proposed rule change is a commendable step towards upholding these vital principles. By prioritizing transparency, risk mitigation, and impartial governance, the SEC is ensuring that our financial markets remain fair, stable, and trustworthy. I urge the SEC to continue its vigilant oversight and to promote policies that reinforce these core values. Thank you for your attention to this important matter. I appreciate the opportunity to share my support for the SEC's decision and my thoughts on the critical issues at hand. Sincerely, HC, refinery mechanic