Aug. 03, 2022
To Whom It May Concern, I am writing in regards to proposed rule change SR-OCC-2022-803. I could not find the filing on your website and only found it through a Google search linked to SEC.gov. I am hoping this means the proposed rule change has been struck down. If not, I would like to comment on it. Overview: The proposed rule change states that the OCC is seeking "to provide OCC with another vehicle for accessing cash to meet its payment obligations, including in the event that one of its members fails to meet its payment obligations to OCC." (Page 3) Later in this proposed rule change (Page 5), the OCC states: "OCC would only enter into confirmations with an institutional investor that is not a Clearing Member or affiliated bank, such as pension funds or insurance companies, in order to allow OCC to access stable and reliable sources of funding without increasing the concentration of its exposure to counterparties that are affiliated banks, broker/dealers, or futures commission merchants." If I am reading this correctly, the OCC is looking to expand its liquidity reach to pension funds and insurance funds. Essentially putting more pension funds at risk in the case of a member default. American people have been relying on and working towards their pension funds for years. In times of economic turmoil such as now, we cannot allow people's pension funds to be in jeopardy due to the OCC overstepping and taking on too much risk. I understand that later in this rule change, the OCC states that they already have secured funding from certain pension funds due to a 2020 rule change: " In 2020, OCC set the aggregate amount it may seek through the Non-Bank Liquidity Facility program to an amount up to $1 billion. OCC has since secured from multiple pension funds commitments in an aggregate amount of $1 billion." (Page 6) Current OCC Liquidity: The OCC is already provided liquidy in two ways previously stated in the document: "The currently approved Non-Bank Liquidity Facility program is comprised of two parts: a Master Repurchase Agreement (“MRA”) and confirmations with one or more institutional investors, which contain certain individualized terms and conditions of transactions executed between OCC, the institutional investors and their agents." (Page 4) On page 8, section 1, the OCC states: "OCC’s current total Clearing Fund requirement, as of January 31, 2022, was approximately $15.8 billion, of which Clearing Members had deposited approximately $5.5 billion in Government securities." The OCC's current Base Liquidity is $8 billion, as stated on page 8, section 2: "OCC’s Base Liquidity Resources are currently $8 billion, consisting of $5 billion in cash from the Clearing Fund Cash Requirement, $2 billion from the syndicated credit facility, and $1 billion from OCC’s current commitments under the Non-Bank Liquidity Facility" When added together, the OCC is saying they currently have $23.8 billion of liquidity. If the OCC is taking on risk that could surmount to over $23.8 billion in losses, the SEC needs to take action and prevent the OCC from overstepping their liquidity bounds. Proposed Rule Change: Earlier on page 8, they state their proposed rule change: "Considering these factors, the Board of Directors has authorized OCC to seek up to an additional $2.5 billion in external liquidity, including through the Non-Bank Liquidity Facility program." This is over a 10% increase in their total liquidity funding, and they want it to come from people's pension plans and insurance companies. We are currently in tumultuous times in regards to the stock market. The OCC is requesting an increase in liquidity and they want it to come from the American people. This rule can not be approved as it exposes working class people to the decisions of Wall Street even further. The OCC then goes on to state that: "Removing the present $1 billion dollar cap to the Non-Bank Liquidity Facility program will also have the effect of removing one of the events in which OCC would file an advance notice for entering into individual commitments that OCC identified in a prior advance notice." (Page 9) This portion is asking to remove the reporting requirements for their Non-Bank Liquidity Facility actions. So they are asking to expand their Non-Bank Liquidity facility to encompass more pension funds, and requesting that they no longer have to file when using their Non-Bank Liquidity facilities. Please correct me if I am misunderstanding this. Conclusion: In summary, it appears as if the OCC is requesting an additional $2.5 billion in liquidity from their Non-Bank Liquidity Facility (Page 8). This includes access to "pension funds and insurance companies" (Page 5). If the OCC is taking on risk that is amounting to more than $23.8 billion (their current liquidity resources), something needs to be done. It also seems that their risk tolerance continues to grow, as they have increased their Cash Clearing Fund Requirement multiple times in the past two years (Page 7). Their risk tolerance can not grow forever, this needs to stop. The OCC seems to have lost control. Rather than lower their risk tolerance, they continue to seek additional liquidity, exposing third parties to their inept ability to control counter-parties. The SEC needs to step in here and stop the bubble that is forming at the OCC. Approving this rule change would show that the SEC has no intent of doing that. On top of the OCC seeking to use liquidity from pension funds and insurance companies, they want to remove the reporting aspect of their Non-Bank Liquidity Facility. This would leave people in the dark of what is happening with their pensions. The OCC would have partial control over American people's retirement funds, and the people would not ever know it is being used to cover Wall Street's risky bets. On top of that, if Wall Street's risky bets fail, some Americans are set to lose their retirement savings. Money that they worked their entire lives for. Money they depended on for housing, food, and their children. This rule can not be passed if the SEC is to uphold its fiduciary duty to the American people. I strongly urge the SEC to deny this rule change and let the OCC figure their problems out on their own. Do not expose the American people to the actions of big players on Wall Street. If I am misunderstanding anything in this requested rule change, please let me know and correct me. I look forward to your response. Best, Derek Barnes