May 16, 2024
Dear Commissioners, I am writing to express my full support for the Securities and Exchange Commission's recent decision to reject the Options Clearing Corporation's (OCC) proposed rule change regarding the adjustments to margin requirements and the roles of Financial Risk Management (FRM) officers. This letter outlines my rationale, which aligns with the Commission’s commitment to protecting investors, ensuring transparency, and mitigating systemic risks within our financial markets. Conflict of Interest Concerns: The role of the FRM Officer, as proposed by the OCC, presents a conflict of interest that could compromise the objective assessment of financial risks. The independence of risk assessment processes is essential to maintain the integrity of financial oversight. The SEC’s concerns regarding the FRM Officer’s dual responsibilities for both setting and evaluating risk parameters are well-founded and underscore the need for a more robust governance framework to ensure unbiased risk management. Transparency and Investor Protection: The SEC’s decision highlights significant concerns regarding the transparency of the OCC's proposed rule changes. A clear and transparent regulatory environment is crucial for maintaining investor confidence and ensuring the fair functioning of the markets. The OCC’s proposal lacked sufficient detail on how margin levels would be adjusted and under what specific conditions. This lack of clarity could potentially obscure the true risks investors face, thereby undermining the principle of fair and equitable market practices. Systemic Risk and Market Stability: Adjusting margin requirements based on intra-day or real-time market conditions, as proposed, introduces a level of unpredictability that can amplify systemic risks during periods of high volatility. Such changes could lead to increased margin calls, potentially triggering liquidity shortages among clearing members. The SEC's cautious stance on this matter is prudent and necessary to prevent such outcomes, which could have far-reaching consequences on market stability and integrity. In conclusion, I commend the SEC for its thorough review and justified disapproval of the OCC's proposed rule change. Your decision underscores the Commission's dedication to upholding the highest standards of market regulation—prioritizing transparency, mitigating risks, and protecting investors. Thank you for your continued commitment to maintaining the integrity of our financial markets. Please feel free to contact me should you require further information or discussion on this matter. Sincerely, Common household investor