Feb. 7, 2024
This comment is in regards to: Proposed Rule SR-OCC-2024-001 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".
I have several issues with this proposal. How is anyone supposed to interpret the intentions of a proposal if over 200 pages of the proposal are completely redacted. This does now show strength in transparency. What this does instead is obscure important information to form opinions from, and casts a shadow over the rule making process. Lacking transparency at this scale especially, would prevent me form considering supporting any proposal like this.
The changes proposed appear to be crafted in a way to protect Clearing Members from exposure to the risk of bad bets they may have made. There are 10s of trillions of dollars in derivatives, much higher than the entire GDP of the United States, which may possibly stand to be unwound under financial system stress. This is an issue for those who are so over-leveraged, they stand to be at risk of liquidation in the event of systemic turbulence. Exactly why the rules were put in place to begin with.
The margin rules currently in place, are set to PREVENT systemic issues of this sort. If these have been ignored by the financial experts who steer these institutions ("clearing members"), than these experts, and institutions they lead, should be deemed incapable of further operating and therefor be liquidated. They broke the fundimentals rules we are all supposed to follow.
This rule would inherently give the OCC the power to waive the margin levels that were set to prevent any issues in the first place. If this rule was to pass, this would undermine the fundimentals of the markets, and make a mockery of every "non-clearing member" institution, or persons, who invests within the US markets under the current rules.
As a household investor, I would face a margin call the moment my derivatives turned sour during times of high volatility, and I would assume the following consequences in full. This is clearly stated and agreed upon by me, and my broker, and therefor, by extention, the SEC.
If an institution and therefor, their financial personal, cannot manage its portfolio's risk, it should face the consequences of the liquidation rules we already have in place. If persons involved in the risk management office of these firms deliberately engage in bad faith actions and non-compliance of the risk, then they should be removed and face the consequences of breaking the law. Jail time, and fines.
I thank you for the time to present my views and OPPOSITION to proposed rule SR-OCC-2024-001 and I hope you consider the ramifications this rule would have and the damage it would cause to the pinnacle of our world markets. The United States.
Regards
Tim Ruttan