Feb. 11, 2023
As a retail investor, I believe it is crucial to have a transparent and fair financial system and I'm writing to voice my strong opposition to the above. My reasons are as follows: - The fixed collateral haircuts do not accurately represent the potential fluctuations in asset values, especially with the proposed Historical Value-at-Risk model. This is because the model's example history excludes significant periods of market stress, including the 2008 Global Financial Crisis. It is essential to have a margin calculation model that can withstand market stress. - Replacing the STANS model with a similar one based on "average" scenarios ignores possible long tail risks, such as the 2008 Global Financial Crisis. The margin calculations should be able to handle these long tail risks so that the OCC can manage them effectively. I believe that the current CiM approach could be modified to incorporate these potential long tail risks, taking into account the history of the STANS margin calculation method with Monte Carlo simulations. - Eliminating or lowering the third-party credit rating requirements increases the risk to the OCC. Instead, the OCC should take into account lowered credit worthiness with commensurate increases in margin and capital requirements. It is crucial to incentivize Clearing Members and Clearing Banks to properly manage risk, especially after the 2008 Global Financial Crisis. - I would like to bring to your attention the paper by the BIS on the "four lines of defense". Proposed changes to reduce external audit, supervision, and credit ratings weaken the Risk Management models, making it more likely for banking scandals, failures, and bankruptcies to occur. It is concerning that the exhibits to this proposal are nearly completely redacted, which significantly limits public review and comment. I'd like to add as a final note that I strongly believe that proposals with significant redactions hinder public review and comment, and this proposal be rejected on that basis alone. Thank you for taking the time to consider my thoughts on this matter. Sincerely, an individual investor.