Feb. 7, 2024
To Whom it May Concern: I hope this letter finds you well. I am writing to express my deep concerns and vehement opposition to the proposed rule change outlined in SR-OCC-2024-001 34-99393, titled "Proposed Rule Change by The Options Clearing Corporation Concerning Its Process for Adjusting Certain Parameters in Its Proprietary System for Calculating Margin Requirements During Periods When the Products It Clears and the Markets It Serves Experience High Volatility." Firstly, I would like to emphasize the critical nature of the issues I am about to address. The lack of transparency in the financial system, as exemplified by this proposal, is disconcerting. The redacted details and limited supporting information hinder public review, rendering it impossible for the public to provide meaningful input. This, alone, should serve as grounds for the rejection of the proposal. My primary concern lies in the creation of an unfair marketplace for market participants, particularly retail investors. The proposed rule change, coupled with the OCC's repeated reduction of margin requirements for Clearing Members, exposes retail investors to long-tail risks without adequate safeguards. This imbalance undermines the principles of fair play and investor protection, demanding the outright rejection of the proposal. The argument put forth by the OCC, justifying these special margin reduction procedures due to the potential cascade of Clearing Member defaults, raises alarming issues. The proposal effectively places Clearing Members in a "Too Big To Fail" category, absolving them of the consequences of inadequate risk management. This is inherently unjust and distorts market dynamics. I strongly advocate for the rejection of this proposal and the imposition of strictly defined margin requirements on Clearing Members, aligning them with the standards applicable to other investors. Furthermore, the proposal introduces a conflict of interest for the Financial Risk Management (FRM) Officer. While the FRM Officer is tasked with protecting the OCC's interests, the proposal necessitates protection for Clearing Members to shield the OCC from financial risk. This conflicting mandate jeopardizes the effectiveness of risk management strategies, and I urge you to reconsider this aspect of the proposal. The rubber-stamping of margin requirement reductions for Clearing Members on the brink of failure compromises the protection against market risks associated with their positions. The proposal, in its current form, fails to ensure the collection of adequate margin collateral, exposing the OCC to potential bailouts. I implore you to reject this proposal and enforce robust margin requirements that safeguard the OCC's interests and minimize the need for bailouts. The concern regarding potential liquidity issues for non-defaulting Clearing Members, as indicated by the proposal, is paradoxical. By mitigating procyclical margin requirements, the first line of protection for the OCC—margin collateral from at-risk Clearing Members—is directly undermined. This illogical premise further underscores the urgent need for a comprehensive reevaluation of the proposal. In conclusion, I earnestly request your careful consideration of the issues raised and propose the following modifications: Increase and enforce margin requirements commensurate with risks associated with Clearing Member positions. Encourage Clearing Members to position their portfolios to account for stressed market conditions and long-tail risks. The current proposal incentivizes the creation of "Too Big To Fail" entities, fostering excessive risk and leverage. I believe that these modifications will align the proposal with fair market principles, prioritizing investor protection and systemic stability. I appreciate your time and attention to this matter. Your commitment to ensuring the integrity and fairness of our financial system is crucial, and I trust that you will give due consideration to the concerns expressed in this letter. I have sent 2 other emails regarding this manner, but have not yet received confirmation that my messages have been received by the SEC. This is in spite of other investors who I know HAVE received confirmation. Please confirm that this and my other messages have been received and that action will be taken to rectify this grievous error in decision making. I will not stop until this issue has been addressed, and will continue to make my voice heard with the millions of others. Sincerely, Russell Radwanski