Feb. 5, 2024
Dear Securities and Exchange Commission, I am writing to express concerns about the proposed rule change by the Options Clearing Corporation (OCC) regarding margin requirement calculations during high market volatility. As a long-term investor committed to market stability, I appreciate the opportunity to share my insights. The proposed rule (SR-OCC-2024-001), seeking to formalise margin threshold calculations, raises concerns about unintentionally protecting risky financial positions during market volatility. By formalising the adjustment of margin requirements based on market conditions, it may hinder the normal risk management mechanism of margin calls, allowing investors with imprudent risks to avoid necessary adjustments. This, coupled with the OCC's history of frequent control setting adjustments, poses risks to long-term market stability. A notable concern is the role of the Financial Risk Management (FRM) Officer, creating a potential conflict of interest in safeguarding OCC's interests over broader market well-being. Additionally, the lack of transparency in redacted materials accompanying the proposal limits our ability to evaluate its effectiveness and diminishes opportunities for informed public discourse. To address these concerns, I propose prioritising Clearing Fund deposits of non-defaulting firms over the OCC's pre-funded resources. This ensures that Clearing Members' contributions play a more immediate role in covering losses, aligning with principles of equity and transparency. Additional safeguards include an independent review mechanism to assess control settings' impact and enhanced transparency requirements. Other refinements to the proposed rule include prioritising enhanced transparency, strengthening oversight mechanisms, incorporating public input, establishing industry-wide standards, and advocating for public accessibility of stress testing results. In conclusion, I am committed to fostering a financial environment prioritising fairness, transparency, and the well-being of all market participants. I trust the SEC will thoroughly consider these concerns and work towards a rule that addresses risk management while upholding broader principles of market integrity. Sincerely, Nicholas Neeley