Feb. 5, 2024
Dear SEC, As an individual investor, I wish to express my concerns over SR-OCC-2024-001, particularly regarding its transparency and potential implications on market fairness. The obscured details within Exhibit 5 and related materials limit meaningful public scrutiny, suggesting the proposal's rejection until full disclosure is provided. The proposal criticizes the absence of mandatory procyclicality controls by U.S. regulators, highlighting the risk of increased margins during volatile markets potentially destabilizing clearing members. Given OCC's critical financial infrastructure role, such opacity and blame shifting raise doubts about the reliability of self-regulation in safeguarding market integrity. The essence of the proposal appears to alleviate the financial pressure on clearing members by easing margin requirements, potentially at the OCC's risk. This approach seems counterintuitive, as it may encourage under-capitalization and excessive leverage among clearing members, increasing systemic risk. Historically, the OCC's adoption of "idiosyncratic" and "global" control settings to reduce margin requirements, as noted over 200 times in recent years, suggests a pattern rather than exceptions. This practice risks creating an unequal playing field, where retail investors bear the brunt of market risks, while clearing members are shielded from their speculative consequences. To address these concerns, I propose the following adjustments: Enforce Stricter Margin Requirements: Clearing members should be incentivized to manage their portfolios against volatile market conditions without expecting margin requirement reductions. Implement External Audits and Public Reporting: A third-party audit function could ensure risk management practices are up to industry standards, enhancing transparency and accountability. Reorder Loss Allocation: Prioritize the use of clearing member funds over OCC's resources in the event of a default, encouraging collective risk management among clearing members. In conclusion, the rule proposal's current form may undermine market fairness and stability. I recommend its revision to ensure stringent risk management practices among clearing members, promoting a more resilient and equitable financial ecosystem. Thank you for considering my feedback. Sincerely, A Concerned Retail Investor