May 18, 2024
Dear Sir/Madam, I am writing to formally oppose the proposed rule SR-OCC-2024-001 by Options Clearing Corporation (OCC), which involves the implementation of a black box algorithm to calculate margin collateral requirements during periods of high market volatility. I believe this proposed rule is contrary to the principles of transparency and fairness that are fundamental to an open and free market. The use of a proprietary algorithm to calculate participant's margin requirements raises significant concerns. The ability to adjust the parameters of this proprietary algorithm during high volatility periods poses a risk of unequal treatment among market participants. During times of high volatility, the need for consistent and fair risk assessment is paramount. If the OCC can modify the algorithm's parameters without clear oversight or accountability, there is a possibility that certain participants might be favored over others. This could lead to unfair advantages and market distortions, precisely at times when the robustness and resilience of participants should be thoroughly tested. The integrity of the financial markets depends on a level playing field where all market participants are subject to the same rules and standards. Introducing a mechanism that allows for discretionary adjustments undermines this principle and could erode trust in the market's fairness. Furthermore, it could lead to regulatory arbitrage, where firms might alter their behavior not based on genuine risk management, but on perceived benefits or leniencies within the margin calculation process. In conclusion, I urge the Securities and Exchange Commission to reject the proposed OCC rule SR-OCC-2024-001. I appreciate your attention to this matter and your commitment to upholding the principles that support a free and open market, with the limited resources provided to you. Sincerely, A Household Investor from California