Feb. 7, 2024
Dear Securities and Exchange Commission, As an active participant in the financial markets, committed to promoting transparent, fair, and stable market practices, I am writing to express my strong objection to the proposed rule SR-OCC-2024-001. While I acknowledge the rule's intent to formalize OCC's process for adjusting during periods of high volatility, the lack of transparency, particularly the redaction of specific details related to parameter and margin threshold calculations, raises serious concerns. Transparency is crucial for market participants to assess the fairness and effectiveness of risk management measures. The supporting evidence in SR-OCC-2024-001, pages 58 to 263 (205 total pages of crucial information), has been redacted, including various exhibits presented by the OCC outlined in the table of contents to justify the rule proposal. If the rule aims to establish parameters in the OCC's proprietary system for calculating margin requirements during high volatility, why are retail investors not provided with specific details on how these parameters will be determined? Moreover, the proposal grants the OCC authority to modify margin requirements based on market conditions through high volatility control settings, yet specific details on parameter calculation are not disclosed. This lack of transparency is troubling. Additionally, the reliance on idiosyncratic control settings, concentration of decision-making authority in a single FRM Officer, and potential systemic risks from frequent adjustments during high volatility are alarming. The current proposal poses a threat by allowing the OCC extensive authority to adjust margin thresholds based on undisclosed parameters, jeopardizing margin call requirements during critical events. The absence of solicited comments for public input further raises concerns about transparency and fairness in the rule-making process. In regulatory environments, engaging with stakeholders is crucial to address concerns from various parties and ensure well-rounded rules. Furthermore, the significant role of short hedge funds and institutions in the financial markets highlights the need for enhanced margin requirements. For example, Citadel Securities has disclosed figures exceeding 65 billion in 'securities sold, not yet purchased.' The extent of leverage exhibited by this singular firm underscores the concerning escalation of financial risk practices. Another instance is the collapse of Archegos Capital Management, further exemplifying the widespread and excessive levels of financial risk. While the current regulatory framework relies on capital requirements to curb excessive risk-taking, I argue that increased margin requirements are equally, if not more, crucial in mitigating systemic risks. In conclusion, I vehemently oppose the adoption of proposed rule SR-OCC-2024-001 in its current form and advocate for a thorough reconsideration of its implications. I urge the inclusion of measures such as strengthening and enforcing margin requirements, introducing external auditing and supervision, incorporating public input, and enhancing transparency requirements. These steps are essential to build trust among market participants and uphold the stability and integrity of our financial markets. Thank you for your attention in this matter. Sincerely, Lon Wharton, Concerned Retail Investor