January 24, 2005
Dear Mr. Katz
Lakeshore Securities has been doing brokerage on the floor of the CBOE for 25 years, with a primary emphasis in the SPX pit. Our customers, which are primarily the large banks have constantly complained that the margin playing field between the CME and the CBOE is not level. These customers engage in low-risk strategies doing spread transactions and writing index options for an absolute return with low levels of volatility.
We therefore would encourage the SEC to use a risk based portfolio margining and cross-margining system rather than the current strategy based margining system. Doing this would make the margins on certain SEC-regulated index options spread positions more closely aligned with similar futures options positions at CFTC-regulated markets.
Thank you for the opportunity to comment.
Jeffrey T. Kaufmann
Lakeshore Securities L.P