May 14, 2024
As a household investor, I am deeply troubled by the recent rule change proposal put forth by the Options Clearing Corporation (OCC). This proposal would allow them to reduce margin requirements for clearing members who are at risk of default. In my view, this change is not only illogical but also irresponsible. It would significantly increase systemic risk in the market. Here's why I'm so concerned: Lack of Transparency: The details of the proposal are heavily redacted, making it incredibly difficult for the public, myself included, to properly review and comment on it. This lack of transparency raises serious questions about the true motives behind the proposal. Heightened Risk: Reducing margin requirements for risky clearing members opens the door for potential defaults.If a default were to occur, it could have a domino effect, triggering a cascade of defaults that could destabilize the entire financial system. This kind of widespread instability would have a devastating impact on my investments. Unequal Treatment: The proposed rule change blatantly favors clearing members. By allowing them to avoid margin calls, it essentially shields them from some of the inherent risks of the market, while I, as a household investor, am left exposed to these very same risks. This creates an unfair playing field. Conflict of Interest? I have concerns about a potential conflict of interest within the OCC. Statements from the OCC's FRM officer seem to prioritize the safety of clearing members over the stability of the clearing agency itself.This prioritization raises red flags, as a robust and secure clearing system is vital for protecting the interests of household investors like myself. Better Solutions Exist: There are alternative solutions that could effectively mitigate systemic risk. These include increased transparency in the rulemaking process, stricter margin requirements for clearing members, and more rigorous risk management practices across the board. I urge the Securities and Exchange Commission (SEC) to reject the OCC's proposal. The SEC should instead consider alternative solutions that prioritize the safety and stability of the entire financial system, ensuring a fair and level playing field for all market participants, myself included. Sincerely, A concerned household investor.