Feb. 8, 2024
To Whom It May Concern, I am writing to express my opposition to the proposed rule change SR-OCC-2024-001. While I understand the intention behind adjusting parameters in the STANS model during periods of high volatility, I am concerned that the rule inadvertently encourages risky and speculative behavior by not adequately addressing the potential for procyclical margin requirements that can exacerbate financial instability. The rule's approach to managing high volatility and idiosyncratic price moves by implementing high volatility control settings may not sufficiently mitigate the inherent risks, particularly for positions that can pose infinite risk, such as short selling. The proposed adjustments to the GARCH model parameters and the establishment of control settings seem to be a temporary solution that does not address the underlying issue of over-leverage in risky positions. To better protect the market and its participants from the fallout of speculative trading and to ensure the stability of the financial system, I recommend a more proactive approach. Specifically, I suggest increasing initial margin requirements. This adjustment would provide a more robust buffer against the potential losses from high-risk positions, including short positions, thereby reducing the reliance on procyclical adjustments to margin requirements. Increased initial margins would compel market participants to more carefully consider the risks associated with their trading strategies, potentially leading to a healthier and more stable market environment. It is crucial that we do not simply "kick the can down the road" but instead take meaningful steps to address the root causes of market volatility and speculative risk-taking. Thank you for considering my response. I urge the committee to reconsider the implications of the proposed rule and to adopt measures that genuinely enhance market stability and protect investors. Myself and other investors are aware of the 99% current expected shortfall in margin based on your own documentation. We are also aware 20 billion dollars was not included in previous margin calls. This is unacceptable and only encourage risky behavior. Sincerely, Bryan Strange