Feb. 7, 2024
Dear SEC, I appreciate the opportunity to comment on SR-OCC-2024-001 34-99393 concerning the proposed rule change by The Options Clearing Corporation (OCC) related to its margin requirement adjustment process during periods of high volatility. I strongly oppose this proposal and do not support its approval due to several significant concerns. 1. **Lack of Transparency:** The redaction of critical details in the proposal prevents meaningful public review and hinders informed commentary. Transparency is essential for maintaining trust in our financial system, and this proposal should be rejected solely on the basis of insufficient transparency. 2. **Unfair Marketplace:** The proposal creates an uneven playing field for market participants, particularly retail investors, who face the repercussions of long-tail risks while the OCC repeatedly waives margin calls for Clearing Members. This undermines market fairness, and the rule proposal should be rejected. Clearing Members must be subject to well-defined margin requirements like other investors. 3. **Conflict of Interest:** The proposal introduces a fundamental conflict of interest for the Financial Risk Management (FRM) Officer. While their role is to protect OCC's interests, the outlined situation requires protecting Clearing Members to prevent OCC's financial risk. Rubber stamping margin requirement reductions for at-risk Clearing Members compromises the protection from market risks associated with margin collateral. The proposal should be rejected, and the OCC should enforce adequate margin requirements. In light of these concerns, I recommend the following modifications: 4. **Increase and Enforce Margin Requirements:** Rather than reducing margin requirements, encourage Clearing Members to maintain portfolios that account for stressed market conditions and long-tail risks. This proposal incentivizes excessive risk-taking by Clearing Members, potentially leading to a "Too Big To Fail" scenario. Margin requirements should be increased and strictly enforced to mitigate such risks. 5. **Thorough Impact Assessment:** I urge the SEC to conduct a comprehensive impact assessment on the proposed rule change, considering its implications on various market participants and the overall stability of the financial system. This assessment will aid in making informed decisions that prioritize market integrity and investor protection. In conclusion, I believe that Increase and Enforce Margin Requirements modifications are essential to address the shortcomings in the proposed rule change and uphold the principles of transparency and fairness in our financial system. Sincerely, Simon Hampton BSc (Hons) MSc ***** Email confidentiality notice ***** This message is private and confidential. If you have received this message in error, please notify us and remove it from your system.