May 17, 2024
I oppose the proposal in its current form. The proposal should clearly outline the method for calculating margin requirements in the OCC's system during volatility. It's concerning that the OCC's FRM Officer has the power to make decisions without oversight in volatile markets. This approach should be revised to enhance margin requirements based on the risks of Clearing Member positions rather than reducing them. Members should be encouraged to manage their portfolios to handle market stress and extreme risks effectively. The current proposal could incentivize risky behaviors, leading to increased risk and leverage, potentially causing more frequent ad hoc interventions, and shifting losses to the public while keeping profits private. The proposal should include: External audits and oversight as additional safeguards, improving transparency and risk management with public reporting. Public consultations and hearings in the rule-making process for broader input and representation. Transparency on stress testing outcomes to build trust among stakeholders. An external oversight committee with industry experts, academics, and investor advocates for unbiased review of risk management practices. Adjusting the Loss Allocation waterfall to encourage proactive risk management by Clearing Members, with a focus on protecting the OCC and the public by prioritizing non-defaulting firms' deposits over OCC's resources. Enhanced transparency in reporting and decision-making, including detailed disclosure of margin requirement calculations during high volatility. More active regulatory oversight to ensure accountability and manage risks in volatile markets. Clear criteria for idiosyncratic controls to prevent misuse and ensure consistent application and transparency. Remove all redactions from future proposals for transparency.