Feb. 7, 2024
I oppose the proposal above entitled “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”. It seems as though much of the proposed rule is "redacted" which prevents the public from really understanding the reach of the proposal. For that reason alone, it should be rejected. However, beyond that, this rule creates yet another unfair rule, especially for retail investors, as the OCC repeatedly waives margin calls for Clearing Members by reducing their margin requirements. Margin requirements are there for a reason. Not there until someone doesn't like the repercussions of bad business decisions. Clearing Members should face the consequences of failing to properly manage their portfolio risk just like retail investors, including against long tail events. Clearing Member failure is a natural disincentive against excessive leverage and insufficient capitalization as others in the market will not cover their loss. The OCC should enforce sufficient margin requirements to protect the OCC and minimize the size of any bailouts that may be required. My request is that you Increase and enforce margin requirements commensurate with risks associated with Clearing Member positions instead of reducing margin requirements. Clearing Members should be encouraged to position their portfolios to account for stressed market conditions and long-tail risks. This rule proposal as written encourages Clearing Members to become "Too Big To Fail" in order to pressure the OCC with excessive risk and leverage into implementing idiosyncratic controls more often to privatize profits and socialize losses.