Feb. 4, 2024
Dear Commissioners, I am writing to express my deep concerns regarding the proposed rule change by the Options Clearing Corporation (OCC), referenced as SR-OCC-2024-001, which pertains to the adjustment of parameters for calculating margin requirements during periods of heightened market volatility. As a retail shareholder and an investor in the financial markets, I find it imperative to voice the potential risks this proposal could pose to market stability, the transparency of the regulatory processes, and the inherent conflicts of interest that may arise from the current structure of financial risk management within the OCC. The proposal to adjust margin requirements during volatile market periods, while seemingly beneficial for mitigating immediate risks, raises significant concerns about the long-term stability of the financial system. Lowering margin requirements for Clearing Members, especially those with poor risk management practices, could inadvertently label them as "Too Big to Fail," thus exacerbating systemic risks. Such a precedent may encourage risky behavior, knowing that the regulatory framework provides a safety net for their actions, regardless of the potential detriment to the market's health. Moreover, the redaction of crucial details in the proposal documentation hinders the ability of stakeholders, including retail investors like myself, to fully understand and evaluate the implications of these changes. Transparency is the cornerstone of trust and confidence in financial markets and regulatory processes. Without full disclosure, it is challenging to provide meaningful feedback or to fully grasp the potential consequences of the proposed rule changes. The role of the Financial Risk Management (FRM) Officer as delineated within the proposal also presents a notable conflict of interest. Tasking a single individual with the dual responsibility of protecting OCC's interests and those of at-risk Clearing Members could compromise the integrity of risk assessments and decision-making processes. It is crucial that the OCC implements a framework that ensures impartiality and robust checks and balances to prevent any single point of failure or bias. In light of these concerns, I respectfully urge the SEC and relevant regulatory bodies to thoroughly reconsider the proposed rule change SR-OCC-2024-001. It is essential to prioritize the implementation of measures that enhance transparency, enforce stringent risk mitigation practices, and safeguard the well-being of the broader market ecosystem. Moreover, maintaining strict and non-discretionary margin requirements is pivotal to upholding market discipline, ensuring that entities engaging in excessive risk-taking bear the consequences of their actions, thereby preserving the integrity of the financial markets. In conclusion, while the aim of the proposed rule change may be to enhance the OCC's ability to manage risks during volatile periods, it is vital to ensure that such measures do not inadvertently undermine the stability and integrity of the financial markets. I strongly advocate for a comprehensive review of the proposal, taking into account the long-term implications for market participants and the financial system as a whole. Thank you for considering my comments on this matter. I look forward to the SEC's careful and balanced approach in addressing these issues. Sincerely, Alexander W. Kuchta