May 16, 2024
Dear SEC Commissioners, I am writing to express my strong opposition to the proposed rule SR-OCC-2024-001 submitted by the Options Clearing Corporation (OCC). This proposal, if implemented, poses significant risks to market integrity, fairness, and investor protection. I urge the SEC to reject this rule for the following reasons: Lack of Transparency and Oversight The proposal allows the OCC to adjust margin thresholds using "idiosyncratic volatility control settings" during periods of high market volatility. However, the specific criteria and methodology for these adjustments are undisclosed and redacted. This lack of transparency prevents market participants from understanding how these critical parameters are determined, which undermines confidence in the fairness and reliability of the market. Conflict of Interest The rule grants significant authority to the Financial Risk Management (FRM) Officer to approve these idiosyncratic control settings. This role is tasked with safeguarding both the OCC's interests and those of at-risk clearing members, creating a conflict of interest. The FRM Officer's dual responsibilities could lead to decisions that favor clearing members at the expense of broader market stability and fairness to all investors. Potential for Systemic Risk Adjusting margin requirements during periods of high volatility could inadvertently increase systemic risk. By lowering margin requirements to assist struggling clearing members, the OCC may facilitate further risky behavior, potentially leading to larger defaults and cascading failures across the financial system. This could bring down not just individual firms but also their counterparties, creating a domino effect of defaults. Undermining Market Integrity The proposed rule appears to be a reactive measure to protect clearing members, particularly those with substantial short positions in volatile stocks like GameStop (GME). Such interventions undermine the principles of market integrity and equal opportunity, where all market participants are subject to the same rules and risks. By providing special provisions for certain institutions, the rule could erode trust in the financial markets. Community and Investor Concerns The proposal has faced significant opposition from the retail investor community. Over 2,500 investors have submitted comments highlighting the risks and conflicts of interest inherent in the rule. The collective voice of these investors underscores the need for a regulatory framework that promotes transparency, fairness, and protection for all market participants, not just the interests of large financial institutions. Thank you for your understanding, Vlad from Indiana