Feb. 5, 2024
The "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" (PDF, Federal Register) is being discussed as a concern by me, a retail investor. Several issues have been identified with the OCC rule proposal, and its approval is not supported. The lack of transparency in the financial system, particularly in the redacted details of the proposal, hinders public review and makes it challenging for meaningful comments. The proposal's reliance on blaming U.S. regulators for not adopting specific controls adds to the need for transparency and public scrutiny. The rule appears designed to protect Clearing Members from potential losses, creating a systemic risk due to insufficient capitalization and over-leverage. The repeated reduction of margin requirements for Clearing Members raises concerns about an unfair marketplace for other participants, including retail investors. Rejecting the proposal and implementing strictly defined margin requirements for Clearing Members is advocated to address these issues. The rule proposal's special margin reduction procedures, aimed at avoiding a systemic financial crisis, are criticized for creating a conflict of interest for the Financial Risk Management (FRM) Officer. The FRM Officer's role in protecting Clearing Members to prevent OCC exposure to financial risk undermines the intended protection from market risks associated with margin collateral. The proposal is deemed illogical, and alternatives, such as increasing and enforcing margin requirements, external auditing, and changing the order of loss allocation in the OCC's Loss Allocation waterfall, are suggested to address the outlined concerns. The importance of fair, transparent, and accountable financial systems is emphasized in this comment from a concerned retail investor. Sent from my iPhone