Feb. 7, 2024
This email is meant to convey my opposition to a proposed rule change by the Options Clearing Corporation. It is my understanding that the Options Clearing Corporation (OCC) has proposed a rule change to adjust certain parameters of Its proprietary systems for calculating margin requirements during periods of high volatility. I have concerns about this rule proposal and do not support its approval. I am concerned about the lack of transparency in our financial system as the details of this proposal is significantly redacted which reduces the public access to knowledge on the subject. This proposal should be rejected on that basis alone. The proposal creates an unfair marketplace for some market participants, especially retail investors. The OCC repeatedly waives margin calls for its members by reducing their margin requirements whenever they please. Clearing members should be subject to margin requirements just as other investors are. According to the OCC, these special margin reduction procedures exist because a single clearing member defaulting could result in a cascade of defaults potentially exposing the OCC to financial risk. Thus, clearing members who fail to properly manage their portfolio risk can take advantage of a "get out of jail free card". Clearing members should face the consequences of failing to properly manage their portfolio risk. Default is a natural disincentive against excessive leverage, insufficient capitalization and corruption. Clearing members should be encouraged to position their portfolios to account for stressed market conditions. The current system is corrupted and encourages clearing members to become "Too Big To Fail" in order to pressure the OCC with excessive risk effectively privatizing profits and socializing losses. In light of the issues outlined above, please consider the following modifications: Increase and enforce margin requirements commensurate with risks associated with clearing member positions instead of reducing margin requirements.