May 17, 2024
Dear sir or madam, I am writing to express my concerns about SR-OCC-2024-001, titled “Proposed Rule Change by The Options Clearing Corporation Concerning Its Process for Adjusting Certain Parameters in Its Proprietary System for Calculating Margin Requirements During Periods of High Volatility.” I appreciate the opportunity to provide input on this matter. However, I cannot support the approval of this proposal for several reasons: 1. Systemic Risk: The proposed reduction in margin requirements for Clearing Members increases the risk to financial system stability, particularly if clearing members fail to meet their financial obligations. 2. Moral Hazard: By shifting the costs of Clearing Member defaults to a non-bank liquidity facility, the proposal creates a moral hazard and fosters an unfair marketplace. 3. Inadequate Risk Management: The proposal inadequately addresses liquidity risk and heightens systemic risk, as shown by the OCC's approach to reducing margin requirements. 4. Conflict of Interest: There is an inherent conflict in the Financial Risk Management Officer's dual role of overseeing both the welfare of Clearing Members and the agency itself. 5. Lack of Transparency: The proposal includes significant redactions that hinder meaningful public review and commentary. I also support the SEC's reasons for rejecting this rule change, which include: - Failure to promote prompt and accurate clearance and settlement of securities transactions and safeguard securities and funds. - Lack of clear and direct lines of responsibility in governance arrangements. - Insufficient policies and procedures for managing credit exposures to participants and inadequate margin calculation for potential future exposure. In conclusion, I support the SEC in their decision to reject this proposed rule change to ensure the protection of all investors and the integrity of our financial markets. Thank you for considering my concerns and for your continued efforts to safeguard our markets. Sincerely, Sebastian Hule