Feb. 5, 2024
Dear Securities and Exchange Commission, I'm writing to share my concerns about the Options Clearing Corporation's (OCC) proposal to change how margin requirements are calculated during volatile market times. As an investor with a vested interest in the market's stability and fairness, I value the chance to offer my perspective on this issue. Upon examining the proposal, I've identified several areas of concern. Firstly, the proposed changes could unintentionally protect risky investments during market swings by allowing adjustments to margin requirements. This could undermine the effectiveness of margin calls as a risk management tool, potentially leading to unchecked risky investments and increased losses, which threaten long-term market stability. A significant issue is the proposed role of the Financial Risk Management (FRM) Officer, tasked with protecting the OCC's interests. This responsibility might conflict with the overall market's health. Moreover, the proposal's lack of transparency, due to redacted materials, hinders our ability to fully assess its impact and undermines trust among investors. While the intention to manage risk during volatile periods is acknowledged, it's crucial that these measures do not inadvertently support poor investment decisions. I suggest revisiting the OCC's approach to allocating losses, especially concerning how Clearing Member funds are used during crises. Proposing that these funds be used before the OCC's own resources could ensure a fairer and more transparent risk management system. To address these concerns, I recommend implementing additional safeguards, such as an independent review of the OCC's practices to ensure they align with market integrity and don't favor the OCC unduly. Transparency could be improved by sharing non-confidential summaries of redacted documents, allowing for informed public engagement. Further recommendations include increasing transparency in risk management, involving regulatory bodies more in oversight, incorporating public input into the rule-making process, setting industry standards in collaboration with stakeholders, making stress test results publicly available, and establishing an external oversight committee. These steps would enhance oversight, transparency, and accountability, ensuring the financial market's integrity and fairness. In conclusion, I urge the SEC to consider these concerns and suggestions to create a rule that not only manages risk effectively but also supports the overall principles of market integrity. Sincerely, Redwan