Feb. 7, 2024
Dear SEC, I am writing to express my strong opposition to the OCC's 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." As a seasoned participant in the stock market, I find several aspects of this proposal deeply concerning, and I urge you to carefully reconsider its approval. Firstly, the lack of transparency in the financial system, exemplified by the redacted details within this proposal, raises significant alarm bells. The absence of accessible information inhibits public review and meaningful commentary, rendering it impossible for stakeholders, particularly retail investors, to make informed decisions. I believe this lack of transparency alone should be sufficient grounds for rejecting the proposal. Furthermore, the proposed rules create an unjust playing field for market participants, particularly retail investors who bear the brunt of long-tail risks. The OCC's practice of repeatedly reducing margin requirements for Clearing Members while subjecting retail investors to potential consequences is inherently unfair. I advocate for a rejection of this proposal and the imposition of strictly defined margin requirements for Clearing Members, aligning them with the standards applicable to other investors. The rationale behind the proposed rule, citing the risk of a single Clearing Member default triggering a cascade effect, raises serious concerns. Granting preferential treatment to Clearing Members who fail to manage their portfolio risk effectively creates a moral hazard, effectively labeling them as "Too Big To Fail." This contradicts the natural market disincentive against excessive leverage and insufficient capitalization, undermining the fundamental principles of a fair and balanced market. The proposal also introduces a conflict of interest for the Financial Risk Management (FRM) Officer, whose role is purportedly to protect OCC's interests. However, the outlined scenario necessitates protection for the failing Clearing Member, presenting an inherent conflict that compromises the integrity of risk management. Moreover, the rubber-stamping of margin requirement reductions for at-risk Clearing Members undermines the protective role of margin collateral collected by the OCC, exposing it to financial risk. This practice contradicts the very purpose of margin requirements and should be rejected to ensure the OCC enforces sufficient margins for protection. Given these issues, I propose the following modifications for your consideration: Increase and strictly enforce margin requirements commensurate with the risks associated with Clearing Member positions. Encourage Clearing Members to proactively position their portfolios to account for stressed market conditions and long-tail risks, rather than incentivizing them to become "Too Big To Fail." Address the conflict of interest for the FRM Officer to ensure unbiased protection of OCC's interests. In conclusion, I strongly urge the SEC to reject the current proposal, make the document fully available for public review, and consider significant amendments to address the outlined concerns. Your careful consideration of these issues is crucial for maintaining a fair and transparent financial market. Sincerely, Scott Spiridigliozzi Digital Marketing Manager liozzi1023@gmail.com 316.204.4365