Feb. 2, 2024
Dear SEC/Relevant Regulatory BodyMembers, I write to express my vehement opposition to the proposed rule changes outlined in SR-OCC-2024-001 34-99393 by the Options Clearing Corporation (OCC). As a dedicated stakeholder deeply engaged in the financial markets, my concerns extend beyond mere apprehension; they underscore the potential peril these proposed alterations pose to the stability, transparency, and global resilience of our financial systems. Lack of Transparency: The veil of redacted materials accompanying the proposed rule changes exacerbates a critical concern – a lack of transparency. In the absence of accessible and comprehensive information, stakeholders are left grappling with uncertainty, compromising their ability to make informed decisions. Transparency is not only a procedural necessity; it is an ethical imperative for maintaining the integrity and trust essential to the proper functioning of financial markets. Global Systemic Risks in the Derivatives Market: In an era where financial markets are intricately interconnected globally, any adjustments to margin requirements during volatile periods carry profound systemic implications. The derivatives market, being a linchpin of this interconnected financial ecosystem, necessitates a nuanced and globally-conscious approach. A failure to comprehensively evaluate the global ramifications of these proposed adjustments not only endangers our local markets but has the potential to unleash a cascade of unforeseen risks on the international stage. Contrary to Hard-Learned Lessons from the Great Recession: The proposed rule changes, particularly in their approach to risk parameters, starkly contrast with the lessons learned from the Great Recession. The scars of that economic downturn underscore the imperative of robust risk management strategies. To deviate from these hard-earned lessons is not merely imprudent; it is a disservice to the resilience and stability achieved through post-crisis reforms. Preserving and enhancing these strategies should be our paramount goal. Unintended Consequences and Market Shielding: I am particularly concerned about potential unintended consequences, including the shielding of risky positions during volatile market conditions. The proposed rule changes raise questions about their potential impact on market stability, and the risk of shielding certain positions could exacerbate volatility, undermining the very purpose of risk management mechanisms. Conflict of Interest with Financial Risk Management (FRM) Officer Role: The role of the Financial Risk Management (FRM) Officer raises inherent conflicts of interest. As custodians of risk management, the OCC should be free from conflicts to ensure impartial decision-making. The proposed rule changes may inadvertently amplify these conflicts, compromising the effectiveness of risk management oversight. Given these grave concerns, I urge the SEC to conduct an exhaustive reassessment of the proposed rule changes. I recommend the adoption of measures to enhance transparency, such as providing non-confidential summaries of redacted materials. Additionally, a thorough analysis of the global implications of the proposed adjustments, ensuring that risk management mechanisms align with the lessons of past financial crises, and addressing the potential conflict of interest associated with the FRM Officer’s role is paramount. Our regulatory environment must be characterized by vigilance, foresight, and an unwavering commitment to the enduring strength and resilience of our financial markets. I trust that the SEC will rigorously scrutinize these concerns and take decisive action during the rulemaking process to safeguard the interests of all stakeholders and uphold the integrity of our financial system. Thank you, Will