Feb. 4, 2024
I hope this message finds you well. I am writing to express my gratitude for the opportunity to share my thoughts on SR-OCC-2024-001 34-99393, titled "Proposed Rule Change by The Options Clearing Corporation Concerning Its Process for Adjusting Certain Parameters in Its Proprietary System for Calculating Margin Requirements During Periods When the Products It Clears and the Markets It Serves Experience High Volatility." As a passionate retail investor deeply invested in the integrity and fairness of our financial system, I must convey my concerns regarding the OCC rule proposal. This proposal, among others, raises alarming issues about the transparency of our financial infrastructure, a matter of great significance to every participant in the market. Upon reviewing the details presented in Exhibit 5, I was disheartened to find substantial redactions that hinder public understanding and thoughtful commentary on the proposal. Transparency is the bedrock of trust, and the lack thereof in this instance is a cause for serious concern. Without a comprehensive public review, approving this proposal would be a disservice to the very principles that sustain our financial markets. The OCC's attribution of blame to U.S. regulators for not adopting prescriptive procyclicality controls is equally troubling. In times of heightened volatility, the potential repercussions on Clearing Members and the broader financial system are immense. The OCC's status as a Systemically Important Financial Market Utility (SIFMU) demands unwavering transparency, and the acknowledgment that our financial stability may be at risk raises fundamental questions about the efficacy of current regulatory measures. The heart of my apprehension lies in the proposal's potential impact on Clearing Members. It appears designed to shield them from the consequences of risky trades, thereby increasing the burden on the OCC. The frequency with which margin requirements are adjusted and waived, as noted in your own documentation, raises red flags. The cumulative effect of such leniency could lead to a situation where Clearing Members operate on the brink of insolvency, posing a systemic risk to the entire financial ecosystem. Furthermore, the proposed rule introduces an inherent conflict of interest for the Financial Risk Management Officer, who is seemingly compelled to prioritize the protection of Clearing Members over the OCC. This not only jeopardizes the integrity of risk management but also compromises the safeguarding of the OCC's financial stability. In light of these concerns, I urge you to consider the following modifications: Increase and enforce margin requirements to align with the risks associated with Clearing Member positions, discouraging excessive risk-taking and fostering a resilient financial environment. Introduce external auditing and supervision as a fourth line of defence, mirroring established models for financial institutions. Enhanced public reporting is essential to ensure the proactive identification and management of risks before they reach systemic proportions. Revise the Loss Allocation waterfall to prioritize Clearing fund deposits of non-defaulting firms before OCC's pre-funded financial resources. This shift in the allocation order would encourage responsible risk management among Clearing Members and reduce the likelihood of bailouts for a systemically important clearing agency. Thank you for considering my passionate plea for a fair, transparent, and resilient market. As a concerned retail investor, I believe that these amendments are crucial for the long-term health and stability of our financial system. Sincerely, A Concerned Retail Investor