Feb. 5, 2024
Dear Securities and Exchange Commision, I am writing to express my apprehensions about the proposed rule change by the Options Clearing Corporation (OCC) concerning adjustments to parameters for calculating margin requirements during periods of high market volatility. As a concerned investor deeply invested in the stability and fairness of the financial market, I believe it is essential to bring attention to potential issues that may impact market stability, transparency, and conflicts of interest. The OCC's proposal, outlined in SR-OCC-2024-001, raises concerns regarding the inadvertent shielding of risky financial positions during heightened market volatility. Codifying the ability to adjust margin requirements based on market conditions may hinder the normal risk management mechanism of margin calls, allowing investors with imprudent risks to evade necessary adjustments. This lack of an effective risk management mechanism, combined with the OCC's history of frequent "idiosyncratic" and "global" control settings, poses a risk to market stability and raises questions about the potential for larger losses. One area of particular concern is the role of the Financial Risk Management (FRM) Officer, whose primary duty is to safeguard OCC's interests. This creates an inherent conflict of interest, as protecting OCC’s interests may not always align with the broader market’s well-being. The proposal acknowledges a scenario where risk factor coverage differs significantly under idiosyncratic control settings compared to regular control settings, emphasizing the need for scrutiny. Compounding this concern is the lack of transparency in the redacted materials accompanying the proposal. Transparency is crucial for fostering trust among investors and the public. The redacted nature of the materials limits our ability to fully evaluate the effectiveness of the proposed rule, raising questions about the thoroughness of the evaluation process and diminishing the opportunity for informed public discourse. While recognizing the OCC's intent to mitigate risks during high volatility periods, it is imperative to ensure that risk management measures do not inadvertently shield bad bets. Adjusting parameters for calculating margin requirements is crucial for market stability, but this must be done in a way that aligns with broader market interests. In light of these concerns, I recommend a thorough reconsideration of the proposed rule, with a focus on enhancing transparency, mitigating conflicts of interest, and prioritizing the broader market's well-being. It is crucial to strike a balance between risk management and maintaining the integrity and stability of our financial markets. I appreciate your attention to these concerns and trust that the regulatory body will carefully evaluate the potential implications of the proposed rule change. Your commitment to transparency, fairness, and market integrity is vital in ensuring the continued trust and confidence of investors in the financial system. Sincerely, Gavin Hausmann