Feb. 7, 2024
I appreciate the chance to share my concerns about the OCC's proposed rule change regarding margin requirements during periods of high market volatility. As a retail investor, I'm worried about the lack of transparency in this proposal, especially with significant redactions that hinder public review and feedback. The OCC's blaming of U.S. regulators for not adopting certain controls raises questions about the reliability of both the OCC and regulatory oversight. The proposal suggests that a single Clearing Member's failure could lead to a cascade effect, posing financial risks to the OCC. This reliance on idiosyncratic and global control settings to reduce margin requirements for Clearing Members raises fairness issues for other market participants. The rule proposal seems to protect Clearing Members from risky trades by frequently reducing margin requirements. This creates an unfair advantage for Clearing Members, including potential negative consequences for retail investors. The proposal introduces a conflict of interest for the Financial Risk Management (FRM) Officer, making them more of an administrative rubber stamp than a protector of OCC's interests. The rule's concern about potential liquidity issues for non-defaulting Clearing Members indicates a worry about depleting OCC's pre-funded financial resources. However, the proposal to reduce margin requirements for at-risk Clearing Members seems contradictory to protecting the OCC's interests. The suggested changes in loss allocation and auditing could enhance transparency and safeguard the financial system. In conclusion, I recommend increasing and enforcing margin requirements based on the risks associated with Clearing Member positions. External auditing and supervision, as well as modifying the loss allocation order, could contribute to a fair, transparent, and resilient market. Thank you for considering these concerns and modifications. Sincerely, John Rowe