Feb. 2, 2024
To Whom It May Concern, I am writing to express my concerns regarding the proposed rule by the Options Clearing Corporation (OCC). After a careful review of the proposal and its implications, I have identified several critical issues that I believe warrant your attention. Firstly, the nature of the rule appears to safeguard positions that are fundamentally unsound. By inhibiting margin calls, it seems the rule may inadvertently enable these precarious positions to escalate unchecked. This approach not only exacerbates the problem but also introduces a significant risk to the stability of the broader market. The essence of risk management is to identify and mitigate potential threats before they expand into unmanageable proportions. However, this rule seems to do the opposite by potentially allowing these "bad bets" to burgeon, thereby magnifying the risk they pose to the financial system. Moreover, the role of the Financial Risk Management (FRM) Officer as outlined in the proposal raises concerns regarding a conflict of interest. It is imperative that the FRM Officer's primary responsibility be to uphold the integrity and stability of the market at large, rather than prioritizing the interests of the OCC. The proposal itself highlights a concerning scenario: "Only one risk factor had 2-day expected shortfall short coverage under 99% while on idiosyncratic control settings that would have been above 99% on regular control settings, driven by one additional 2-day expected shortfall short exceedance." This admission suggests that under normal control settings, the risk measures would be more conservative and protective against market instability. The deviation in this instance points to a prioritization of OCC's interests over broader market safety, which is troubling. Furthermore, the lack of transparency due to the redaction of crucial materials is another significant obstacle to properly assessing the rule's effectiveness and implications. The redaction of key information prevents stakeholders from conducting a thorough and informed analysis of the proposal. Transparency is a cornerstone of trust and accountability in regulatory processes. Without access to all pertinent information, it is impossible for the public and interested parties to fully understand or evaluate the potential impact of the rule. In conclusion, while the intention behind the proposed rule may be to introduce measures that the OCC believes are in its best interest, it is crucial to consider the broader implications such measures may have on market stability and integrity. The concerns outlined above highlight the potential for this rule to protect unsound positions at the expense of market health, introduce conflicts of interest that may compromise risk management principles, and lack the necessary transparency for a thorough evaluation. I urge the SEC to reconsider the proposed rule in light of these concerns and to prioritize the long-term stability and integrity of the financial markets over short-term institutional interests. Sincerely, Aron M. Tästensen Denmark Household investor