Feb. 11, 2023
Dear SEC, I am writing to voice my opposition to the proposed SR-OCC-2022-012, which calls for the adoption of a Historical Value-at-Risk model and the replacement of the current STANS model for margin calculation. Fixed collateral haircuts, as proposed in the SR-OCC-2022-012, do not accurately reflect the potential fluctuations in asset values, particularly in times of market stress. The example history provided in the proposal excludes significant periods of market stress, including the 2008 Global Financial Crisis, which underscores the limitations of the proposed model. Furthermore, replacing the STANS model, which has been in use since 2006 and has a proven track record of success, with a new model that is only similar on "average" under "typical" scenarios ignores the possible long tail risks that could impact margin calculations. These long tail risks, such as the 2008 Global Financial Crisis, have a significant impact on the market and should be considered when calculating margins. Given the history of the STANS margin calculation method with Monte Carlo simulations, the OCC should consider modifying the current CiM approach to incorporate potential long tail risks. This would ensure that the OCC is properly managing these risks and protecting market participants from potential harm. Finally, proposals with significant redactions that prevent public review and comment should be rejected on that basis alone. Transparency and openness in the regulatory process are essential for ensuring that the public has confidence in the decisions made by the SEC. In conclusion, I strongly urge the SEC to reject the proposed SR-OCC-2022-012 and consider alternative approaches that better account for the potential impact of long tail risks and provide for public review and comment. Thank you for considering my comment. Sincerely, Forrest Walker