Feb. 3, 2024
Dear Securities and Exchange Commission, I am writing to strongly oppose the Options Clearing Corporation's (OCC) proposed rule change outlined in SR-OCC-2024-001. The proposal seeks to adjust parameters for calculating margin requirements during periods of high market volatility. The extensive redaction of details in the proposal is a concern as it hinders meaningful public review, limiting transparency. Attributing the need for adjustments solely to U.S. regulatory failures oversimplifies the issue, as market participant misconduct, such as excessive naked shorting, also plays a role. Reducing margin requirements to protect Clearing Members may unintentionally heighten risks for the OCC and the broader financial system. The use of over 200 "idiosyncratic" control settings in less than four years raises questions about consistency and impact on market integrity. The proposed rules create an uneven playing field, repeatedly benefiting Clearing Members and potentially designating them as "Too Big To Fail," posing risks to financial stability. The concentration of responsibility in the Financial Risk Management (FRM) Officer raises concerns about impartial risk assessment. To address these issues, I propose the following modifications: 1. Increase and enforce margin requirements to align with Clearing Member risks. 2. Introduce external auditing and supervision for enhanced transparency and risk management. 3. Modify the Loss Allocation waterfall to prioritize non-defaulting firms' Clearing fund deposits. These recommendations aim to create a more transparent, accountable, and stable market environment. I urge the SEC to reconsider the proposed rule, considering its implications on market participants and the financial system. Thank you for your attention. -- Regards, Joshua J. Fenske