May 17, 2024
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). As an investor from Germany, I believe the SEC's decision is a crucial step towards ensuring the protection of investors, mitigating systemic risks, and upholding the integrity of the American financial market, which is vital for maintaining global investor confidence. One of the primary concerns regarding the OCC's proposed rule change is the significant lack of transparency. The proposal failed to provide sufficient detail and clarity about the methodologies and assumptions underlying the proposed margin requirements adjustments. This opacity poses a substantial risk as it undermines market participants' ability to fully understand and evaluate the implications of the proposed changes. Transparent and clear regulatory frameworks are essential for fostering trust and confidence among market participants, and the SEC's decision appropriately prioritizes this principle. Furthermore, the proposed rule change raises serious concerns about potential systemic risks, particularly in relation to margin requirements adjustments during periods of market volatility. The OCC's proposal could have allowed for substantial reductions in margin requirements during times of increased market stress, potentially exacerbating market instability and increasing the risk of a liquidity crisis. During volatile periods, maintaining robust margin requirements is critical to ensure that clearing members can meet their financial obligations, thereby safeguarding the financial system from cascading defaults. The SEC's decision rightly acknowledges the importance of maintaining stringent risk management practices to protect the broader market ecosystem. Additionally, the proposed rule change presents a clear conflict of interest concerning the role of the Financial Risk Management (FRM) Officer. The proposed rule would have granted the FRM Officer undue influence over margin requirement decisions without sufficient oversight or checks and balances. Such concentration of power in a single role raises significant governance concerns and could compromise the objectivity and impartiality required in making critical risk management decisions. The SEC's decision to reject this aspect of the proposal aligns with best practices in corporate governance and risk management, ensuring that decision-making processes are not unduly influenced by potential conflicts of interest. As an international investor, my confidence in the American financial market is paramount. The adoption of rules that lack transparency, increase systemic risks, and present conflicts of interest would significantly undermine my faith in the stability and fairness of the market. The SEC's decision to reject the OCC's proposed rule change reassures me and other global investors that the American market remains committed to maintaining the highest standards of transparency, risk management, and investor protection. In conclusion, the SEC's decision to reject the OCC's proposed rule change is a prudent and necessary action to preserve the principles of transparency, risk mitigation, and investor protection that are foundational to a fair and orderly financial market. By addressing the substantial concerns related to the lack of transparency, potential systemic risks, and conflicts of interest, the SEC has demonstrated its commitment to safeguarding the integrity of our financial system. Thank you for your attention to this matter and for your ongoing efforts to protect and enhance the stability of our financial markets. Sincerely, Andreas Baier