Aug. 10, 2022
August 10, 2022
I'm concerned about this proposal as it seems it, along with other current OCC proposals, makes it seem they are inadequately managing the risk of their members/participants. It appears that this proposal is intended to allow the OCC to obligate (force) buyers to engage in transactions that may have a known and direct negative impact on that buyer. What's even more concerning is it appears the OCC would like to be able to declare whether or not there is a default with a member regardless of the material facts/circumstances. If I'm reading this correctly: an OCC member can default, the OCC can declare that they actually didn't default, and the OCC exercises the ability this proposal would give them to force others into giving the OCC money to cover the needs of the party suffering a \"material adverse change.\"
This seems to allow the OCC to define the financial reality of a market event, i.e. this default is not a default as we forced people to give us money to cover the not-defaulting members obligations. This leads me to believe the OCC is aware of significant systemic risks within their members, and have decided that rather than holding those members (and the OCC) accountable for their own decisions, they would like to force other people to pay off their debts. This doesn't seem to be in the interest of free and fair markets.
The portion of the proposal I am writing about is summarized below:
\"The buyer would be obligated to enter into transactions under the MRA up to its committed amount so long as no default had occurred and OCC transferred sufficient Eligible Securities. The buyer would be obligated to enter into transactions even if OCC had experienced a material adverse change, such as the failure of a Clearing Member.\"
\"Funding mechanics would be targeted so that OCC would receive the Purchase Price in immediately available funds within 60 minutes of its request for funds and delivery of Eligible Securities and, if needed, prior to OCC's regular daily settlement time. These targeted funding mechanics would allow OCC to receive needed liquidity in time to satisfy settlement obligations, even in the event of a default by a Clearing Member or a market disruption.\"
\"OCC would require that the MRA not contain any additional events of default that would restrict OCC's access to funding. Most importantly, OCC would require that it would not be an event of default if OCC suffers a \"material adverse change.\"\"
Thank you for the opportunity to comment on this proposal, and for taking the time to review my thoughts.