Feb. 7, 2024
Subject: SR-OCC-2024-001 34-99393 Date: Feb 6 2024 Dear OCC, I am writing to request that rule SR-OCC-2024-001 not be implemented for several reasons. First, the action of avoiding systemic risk mitigation appears to be the aim of this rule change. However, the action to protect certain failing members is counter-intuitive as the proposed rule change undermines the safeguards currently in place. The proposed change weakens in the financial system by further extending the underlying systemic risk it seeks to avoid. By waiving margin calls for institutions failing collateral requirements, the rule change further weakens risk management safeguards and could potentially expose the wider financial system to greater instability in the event of multiple defaults. Second, waiving margin calls, as proposed by the rule change reduces the financial accountability and consequences for institutions failing to meet collateral requirements, institutions never fearing margin calls can "game" the system by eliminating risk management departments and risk management experts for cost savings. Reducing risk management and accountability for risk management by participating institutions should never be something a rule change should affectuate or promote inadvertently. Third, waiving margin calls for institutions failing collateral requirements may not serve the public and retail interest as it will lead to market distortions and undermine investor confidence. By hiding the true weakness and lack of collateral held by near default players does not allow investors (retail and institutional) to make transparent, informed investing decisions. By prioritizing the interests of institutions over broader financial stability and market transparency, the proposed change may will reduce the market's ability to function effectively. Fourth, by removing a minimum level of "skin-in-the-game" , leaves the financial system vulnerable to the use of risk management countermeasures. Allowing players to operate without adequate capital reserves increases the potential impact of defaults and liquidity shortfalls on the broader financial ecosystem. In the short term it may protect players from margin calls but transfers that risk to every other stakeholder, prime broker, bank or others with contract dealings with the over leveraged institution. Who in fact judges the systemic risk magnitude and by what metrics? Will the OCC adjudicate every margin waiver request for its level of systemic risk using a verified mathematic or quantified approach? Is the OCC prepared to budget enough FTEs, time and resources to monitor and document each and every margin waiver and assess the systemic risk quantitatively going forward as a result of this rule change? Fifth, stringent risk management standards, including margin calls for institutions failing collateral requirements should be maintained. Regulators can uphold and ensure robust risk management, safety, and market soundness by all participants, thereby promoting the long-term stability of the financial markets. In conclusion, the proposed rule change, while it protects a few near insolvent players does nothing to safeguard the stability and integrity of the broader financial system. In fact, hiding the true degree of underlying financial vulnerability places others dealing with said player at higher risk. A rule that transfers risks and hides insolvency is not one that should be implemented. Regards M. Tyshenko PhD, MPA Senior Risk Analyst