Feb. 4, 2024
Subject: Formal Objection to Proposed Rule Change SR-OCC-2024-001 34-99393 Dear Chair of the Securities and Exchange Commission, I am writing as a dedicated participant in our financial markets to express my serious reservations about the Options Clearing Corporation's (OCC) recent proposed rule change (SR-OCC-2024-001 34-99393). This rule, aimed at adjusting the parameters for calculating margin requirements during high market volatility periods, raises significant concerns regarding market stability, transparency, and potential conflicts of interest. Firstly, the essence of the proposal—to modify margin requirements during volatile market conditions—might inadvertently destabilize the market rather than safeguard it. Margin calls are a fundamental risk management tool, ensuring that positions are adequately funded and thereby mitigating systemic risk. Altering this mechanism could lead to the accumulation of unmitigated risks, as investors might not be prompted to address over-leveraged positions timely, potentially amplifying market distress during downturns. Furthermore, the lack of transparency in the materials provided alongside the proposal is troubling. Redacted content impedes stakeholders' ability to fully understand and assess the implications of the proposed changes. Transparency is not merely a procedural nicety; it is a cornerstone of trust and confidence in our market structures. Without full disclosure, it is challenging for market participants to evaluate the potential impacts of the rule changes comprehensively. Additionally, the proposed role of the Financial Risk Management (FRM) Officer presents a noticeable conflict of interest. Tasking a single officer with the responsibility to safeguard OCC's interests, especially during turbulent times, may not align with the broader objective of market stability. The concentration of such significant responsibility in one role without sufficient checks and balances could lead to decision-making that prioritizes individual or institutional interests over systemic well-being. In light of these considerations, I urge the SEC to undertake a thorough reassessment of the proposed rule. It is paramount that any modifications to our market's regulatory framework are approached with the utmost caution and diligence, ensuring: 1. **Transparency:** All materials relevant to rule changes should be made fully accessible, enabling stakeholders to make informed contributions to the discourse and ensuring that decisions are made with a comprehensive understanding of their potential impact. 2. **Risk Mitigation:** Changes to risk management mechanisms, such as margin calls, must be carefully evaluated to prevent unintended consequences that could exacerbate market instability. 3. **Conflict of Interest Avoidance:** Roles and responsibilities within the OCC, particularly those as critical as the FRM Officers, must be structured to prevent conflicts of interest, ensuring that market stability and integrity remain the foremost priorities. The financial markets play a critical role in our economy, and their regulatory frameworks must promote stability, fairness, and transparency. I trust that the SEC will consider these concerns with the seriousness they warrant and will take appropriate action to ensure that the proposed rule changes serve the best interests of all market participants. Thank you for your attention to these matters. I remain committed to contributing to a market environment that upholds the highest standards of integrity and stability. Sincerely, Vince Silvestri