Feb. 5, 2024
Dear SEC,
I am against the proposed rule change to reduce margin requirements during periods of high volatility.
This proposed rule will only allow firms to further over leverage themselves.
Changes I would like to see instead are
Increase and enforce margin requirements to align with Clearing Member risks, preventing excessive risk-taking and avoiding the "Too Big To Fail" scenario.
Introduce external auditing and supervision as a "fourth line of defence," enhancing transparency and proactive risk management with public reporting.
Modify the Loss Allocation waterfall by prioritizing Clearing fund deposits of non-defaulting firms over OCC's pre-funded financial resources, promoting self-regulation among Clearing Members.
Emphasize enhanced transparency requirements, ensuring clear and accessible disclosure in reporting and decision-making processes related to risk management measures.
Strengthen oversight mechanisms, involving regulatory bodies more actively to maintain accountability and address emerging risks during periods of heightened market volatility.
Incorporate public input through consultations and hearings in the rulemaking process, fostering inclusivity and making regulatory actions more representative of diverse perspectives.
Encourage the establishment of industry-wide standards and best practices in collaboration with stakeholders to ensure a consistent approach to risk management across the industry.
Provide clearer guidelines for the application of idiosyncratic controls, preventing misuse and proposing a structured evaluation framework for consistency.
Advocate for public accessibility of stress testing results, showcasing the effectiveness of risk management measures and building trust among market participants.
Consider establishing an external oversight committee comprised of industry experts, academics, and investor advocacy representatives to ensure impartial evaluation and scrutiny of risk management practices.
Brett