May 16, 2024
Dear SEC, As a retail investor, I am grateful for the opportunity to comment on SR-OCC-2024-001 (Release No. 34-100009) and support the SEC's grounds for disapproval. I have several concerns about the OCC rule proposal, which I believe should not be approved to ensure a fair, orderly, and efficient market for all investors. I am particularly worried about the lack of transparency in the financial system, as demonstrated by this rule proposal and others. The significant redactions in Exhibit 5 and related information prevent a meaningful public review. Without full transparency, this proposal should be rejected. Public review is crucial, especially since the OCC’s proposed rule faults U.S. regulators for not mandating prescriptive procyclicality controls. As noted, increasing margin requirements during market stress can strain Clearing Members' liquidity, potentially destabilizing the OCC and the broader financial system. Given the OCC's designation as a SIFMU, transparency is imperative. The proposal suggests that the OCC is blaming U.S. regulators instead of adopting necessary safeguards, highlighting a concerning lack of reliability. The proposal appears to protect Clearing Members from risky trades by reducing margin requirements, increasing systemic risks. According to the OCC, margin collateral is essential for mitigating market risks. However, their proprietary STANS system, which can produce procyclical results, is used to justify reducing margins during high volatility, potentially leading to liquidity crises if Clearing Members default. This creates an unfair market for retail investors, who must face long-tail risks without the benefit of margin reductions. The rule proposal thus perpetuates a "rules for thee, but not for me" environment, contradicting the SEC’s mission of maintaining fair markets. By prioritizing the protection of Clearing Members over proper risk management, the proposal increases the likelihood of a systemic financial crisis. Moreover, the proposal introduces a conflict of interest for the Financial Risk Management (FRM) Officer, whose role would shift to protecting Clearing Members to safeguard the OCC. The repeated application of "idiosyncratic" control settings to reduce margin requirements, as documented, further undermines market protections. Given the systemic risk concerns and the need for enhanced public review, I support the SEC's identification of grounds for disapproval, particularly under Section 17A(b)(3)(F), Rule 17Ad-22(e)(2), and Rule 17Ad-22(e)(6) of the Exchange Act. The proposal fails to safeguard securities and funds, protect investors, and maintain clear governance arrangements, among other issues. In light of these concerns, I suggest the following actions: Enforce increased margin requirements commensurate with risks. Implement external auditing and supervision to ensure proper risk management. Reorder the loss allocation waterfall to encourage Clearing Members to monitor each other’s risk management. Suspend and liquidate Clearing Members as soon as their losses exceed margin deposits. Increase redundancy in our financial system to reduce single points of failure. Thank you for considering my comments to protect all investors and maintain a fair, transparent, and resilient market. Sincerely, A concerned investor