May 17, 2024
Dear SEC Members, I'm worried about a new rule, SR-OCC-2024-001, about changing margin thresholds when the market gets really unstable. The rule is troubling because it could let clearing members off the hook when they can't pay what they owe. Margins are meant to stop them from taking too much risk, making sure they have enough money to cover any losses. If we change margin thresholds when things get crazy, clearing members might not have to keep enough money on hand. This could lead to more defaults and make the financial system less stable. This rule makes us question if the options market and the OCC, which manages risk, can still be trusted. I support the SEC's decision to reject this rule and encourage them to keep making choices like this to protect the financial system, using rules like Section 17A(b)(3)(F) and Rule 17Ad-22(e)(2) and (6) to guide them. The OCC is crucial for making sure options trading works smoothly. They need to make sure contracts get fulfilled and manage the risks involved. Margin calls are important because they stop people from taking too many risks. But if we change the rules during wild market swings, it's like changing the rules of a game halfway through to help those who are struggling. Think about a hedge fund betting big on a wild stock. If the stock's price keeps jumping around, the hedge fund might find it hard to keep up with its margin requirements. With this new rule, the margin requirements could be lowered, making it easier for them. This doesn't just encourage risky behavior but also makes it more likely that they'll fail later on. Also, these changes aren't transparent. We don't know exactly how they decide to change the rules. This lack of clarity could lead to unfair treatment of different players in the market. They talk about using "idiosyncratic volatility control settings" to change margin rules during big swings. But they don't explain how they decide on these settings. This could mean they're just making things up as they go along, which isn't fair to everyone involved. They also don't give us enough info on how they calculate these margin rules. This lack of transparency makes it hard for us to trust that they're making fair decisions. Letting the FRM Officer make decisions on their own during tough times could also lead to conflicts of interest. They're supposed to protect the OCC and the clearing members, but what if those interests clash? In summary, Rule SR-OCC-2024-001 is risky and could harm the financial system. It goes against the purpose of margin calls and adds unnecessary dangers. I urge the SEC to think carefully about this rule and protect investors and the stability of the financial markets by saying no to Proposed Rule SR-OCC-2024-001. Clear rules, transparent calculations, and checks on authority are essential to keeping our financial markets stable and fair. Thank you for listening to my concerns. I trust that you'll make the right decision. Sincerely, David Retail Investor