May 16, 2024
Dear Members of the Securities and Exchange Commission, I am writing to express my strong opposition to Rule SR-OCC-2024-001, which proposes altering margin requirements during periods of high volatility. This change weakens safeguards in the options market and increases systemic risk. Weakening Margin Calls Margin calls act as a critical buffer against excessive risk-taking. By requiring adequate collateral, they prevent clearing members from overleveraging their positions. Rule SR-OCC-2024-001 effectively weakens this safeguard by allowing adjustments during volatility, potentially enabling members to avoid necessary adjustments to their positions. Unintended Consequences Imagine a scenario where a hedge fund with substantial holdings in a volatile stock faces increasing difficulty meeting margin requirements due to price fluctuations. Under this rule, the bar for maintaining collateral could be lowered,incentivizing risky behavior and exacerbating potential losses later on. Transparency Concerns The proposal relies on "idiosyncratic volatility control settings" that lack clear guidelines or objective criteria. This opacity raises concerns about arbitrary adjustments and potential favoritism towards specific clearing members.Additionally, redacted information regarding margin threshold calculations undermines transparency and accountability. Unilateral Authority and Conflicts of Interest The rule grants unchecked authority to the FRM Officer to make crucial decisions during market stress. While intended to protect the OCC's interests, this authority creates a potential conflict as the FRM Officer also safeguards potentially at-risk clearing members. Conclusion Rule SR-OCC-2024-001 poses a significant threat to financial stability. It weakens margin calls, introduces opacity, and concentrates decision-making power. I urge the SEC to prioritize market stability and investor protection by rejecting this proposal. Clear guidelines,transparent calculations, and checks on discretionary authority are essential to safeguard the financial system. Thank you for your consideration. Sincerely, Alberto Santoyo