May 16, 2024
Jacob Malherbe CEO X Social Media LLC 4302 Rex Dr. Winter Garden FL 34787 Jacob@xsocialmedia.com 678-427-8490 5-16-2024 Ms. Vanessa A. Countryman Secretary Securities and Exchange Commission 100 F Street, NE Washington, DC 20549-1090 Dear Ms. Countryman, I am writing to express my strong support for the Securities and Exchange Commission’s (SEC) recent decision to reject the proposed rule change submitted by the Options Clearing Corporation (OCC). I commend the SEC for its commitment to maintaining a fair, transparent, and risk-averse financial market that prioritizes investor protection. Lack of Transparency in OCC’s Proposal A primary concern with the OCC's proposal is the notable lack of transparency. Transparency is fundamental to the integrity and efficiency of financial markets, ensuring that all market participants have access to the information necessary to make informed decisions. The OCC’s proposal failed to provide sufficient details regarding the methodologies and models used for calculating margin requirements. This lack of clarity not only undermines the trust of market participants but also hinders the ability of investors to accurately assess the risks associated with their investments. The SEC’s rejection of the rule change underscores the importance of transparency and the need for clear, comprehensive disclosures in all regulatory proposals. Potential Systemic Risks from Margin Requirement Adjustments Another significant concern relates to the potential systemic risks posed by adjustments to margin requirements during periods of market volatility. The OCC’s proposal did not adequately address how these adjustments would be managed or the potential impact on market stability. In times of market stress, abrupt changes to margin requirements can exacerbate volatility and lead to a cascade of forced liquidations, further destabilizing the financial system. By rejecting the proposal, the SEC has acted prudently to prevent such systemic risks, thereby safeguarding the stability of our financial markets. Conflict of Interest in the FRM Officer’s Role The role of the Financial Risk Management (FRM) Officer in the proposed rule change raises concerns of a conflict of interest. The proposed structure would grant the FRM Officer significant discretion over margin requirement adjustments, yet the criteria for these adjustments remain inadequately defined. This concentration of power without clear guidelines can lead to biased decision-making, potentially favoring certain market participants over others. The SEC’s decision to reject the proposal highlights the need for stringent checks and balances to prevent conflicts of interest and ensure fair and equitable treatment of all investors. In conclusion, the SEC’s decision to reject the OCC’s proposed rule change is a necessary and prudent measure to uphold the principles of transparency, risk mitigation, and investor protection. I fully support the SEC’s commitment to maintaining a fair and stable financial market that prioritizes the interests of all investors. I urge the SEC to continue its vigilant oversight and to promote regulatory proposals that enhance market integrity and protect against systemic risks. Thank you for your attention to this important matter. Sincerely, Jacob Malherbe CEO X Social Media LLC Notice of Confidentiality. The information enclosed in this email is being provided on a confidential basis by the sender to the intended recipient only.