Aug. 09, 2022
August 9, 2022 The OCC submits this proposal because the \"OCC now believes that it should seek to expand its liquidity facility to increase OCC's access to cash to manage a member default\". See SR-OCC-2022-803 pg 3. The OCC seeks to \"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\" See SR-OCC-2022-803 pg 5. As described, \"the proposed change would allow OCC to seek a readily available liquidity resource ... as an alternative to selling Clearing Member collateral under what may be stressed and volatile market conditions\". See SR-OCC-2022-803 pg 15. OCC's proposal makes clear that the OCC would preferentially use cash from pension funds and insurance companies over Clearing Member collateral. What purpose does Clearing Member collateral serve if not to meet such payment obligations? To quote the proposal: \"to meet such payment obligations, OCC maintains access to cash from a variety of sources, including, a requirement for members to pledge cash collateral to OCC and various agreements with banks and other counterparties (liquidity facilities) to provide OCC with cash in exchange for collateral, such as U.S. Government securities.\" See SR-OCC-2022-803 pgs 2-3. If the OCC already has access to cash from a variety of sources (including members), why does a private SRO desire additional access to cash held by pension funds and insurance companies for funding? Could OCC desire access to pension fund money because most pension funds are guaranteed by state, local, and federal government such that pension fund losses are ultimately paid for by taxpayers? Could OCC desire access to cash at insurance companies because insurance companies received a hefty bailout in the 2008 Great Financial Crisis? Such that, in the event of a Clearing Member default, preferentially utilizing cash from pension funds and insurance companies once again shifts the burden for Wall St losses to the American taxpayer to avoid \"selling Clearing Member collateral under what may be stressed and volatile market conditions\". See SR-OCC-2022-803 pg 15. Systemic risk continues to increase because of insufficient risk management which includes these blatant and obvious attempts to socialize losses while privatizing profits. Failing to assign losses to those who are responsible will only exacerbate systemic risks thereby creating additional market instability and volatility. In order for our markets to be trustworthy, SROs such as the OCC must satisfy their obligation to properly manage risk for themselves and their participants. As a result, this proposal should be rejected and the OCC should manage a member default using the resources at their disposal, including Clearing Member collateral.