Feb. 4, 2024
Dear Securities and Exchange Commission, I am reaching out to voice my strong opposition to the proposed amendment put forth by the Options Clearing Corporation (OCC), detailed in SR-OCC-2024-001. This amendment revolves around adjusting margin requirement parameters during periods of heightened market volatility. The lack of detailed information within the proposal is concerning, as it hampers the ability for thorough public scrutiny and feedback, ultimately diminishing transparency and accountability. The implication within the proposal that regulatory deficiencies are the primary cause of the need for adjustments oversimplifies a much broader issue that encompasses market participants exploiting their positions, such as through excessive naked short selling. The suggested reduction in margin requirements to protect Clearing Members may inadvertently amplify risks for both the OCC and the wider financial system. Furthermore, the utilization of over 200 instances of "idiosyncratic" control settings in under four years raises doubts regarding their consistency, necessity, and potential impact on market integrity. These rules seem to create an unequal playing field, wherein Clearing Members consistently benefit from reduced margin requirements at the expense of other market participants. Additionally, the proposal effectively designates Clearing Members, even those with poor risk management practices, as "Too Big To Fail," posing potential threats to financial system stability. Additionally, the concentration of responsibility within the Financial Risk Management (FRM) Officer raises concerns, as they are tasked with safeguarding the interests of both the OCC and at-risk Clearing Members. This centralized responsibility raises doubts regarding impartial risk assessment and management. In light of these concerns, I propose the following adjustments to the regulation: Increase and strictly enforce margin requirements to better align with Clearing Member risks, mitigating excessive risk-taking and avoiding the "Too Big To Fail" scenario. Implement external auditing and oversight as a supplementary layer of defense, enhancing transparency and proactive risk management with publicly available reports. Revise the Loss Allocation waterfall by prioritizing Clearing fund deposits of non-defaulting firms over the OCC's pre-funded financial resources, thereby fostering self-regulation among Clearing Members. These suggestions aim to address the highlighted concerns and foster a more transparent, accountable, and stable market environment. I implore the SEC to thoroughly reassess the proposed regulation, considering its potential implications on market participants and the broader financial system. Thank you for considering my input on this matter. Sincerely, James Brashear