Feb. 8, 2024
Dear SEC Contact Person, I hope this email finds you well. I am writing to express my concerns regarding the Options Clearing Corporation's (OCC) recently proposed rule change, 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." As a retail investor, transparency and fairness in our financial system are of utmost importance to me. Upon reviewing the details of the proposal, particularly in Exhibit 5 and supporting information in Exhibit 3, I am troubled by the extensive redactions, hindering public review and preventing meaningful commentary. The lack of transparency in this critical matter raises concerns about the accountability and reliability of the OCC, which is designated as a Systemically Important Financial Market Utility (SIFMU). The proposal, while attributing potential systemic risks to U.S. regulators, paradoxically aims to reduce margin requirements during times of high volatility. This raises a red flag as increased margin requirements typically serve as a safeguard against market instability. The proposal's reliance on "idiosyncratic" and "global" control settings to mitigate risks by reducing margin requirements seems counterintuitive and could expose the OCC to financial risks in the event of Clearing Member failures. Furthermore, the OCC's admission that it has implemented these "idiosyncratic" control settings over 200 times in less than four years, along with the use of "global" control settings during significant market events like the onset of the COVID-19 pandemic and the "meme-stock" episode, raises concerns about the frequency and necessity of such interventions. In light of these issues, I propose the following modifications for consideration: 1. **Increase and Enforce Margin Requirements:** Instead of reducing margin requirements, consider encouraging Clearing Members to maintain sufficient capitalization by increasing and enforcing margin requirements commensurate with the risks associated with their positions. 2. **External Auditing and Supervision:** Implement external auditing and supervision as a "fourth line of defense" to enhance public reporting and ensure that risks are identified and managed before they become systemically significant. 3. **Reorder Loss Allocation Waterfall:** Swap the order of loss allocation in the OCC's Loss Allocation waterfall, prioritizing Clearing fund deposits of non-defaulting firms before OCC's own pre-funded financial resources. This would incentivize Clearing Members to police each other and promote appropriate risk management measures. I believe these modifications would contribute to a fair, transparent, and resilient market for all investors. I appreciate your attention to this matter and the opportunity to voice my concerns. Thank you for your commitment to safeguarding the integrity of our financial system. Sincerely, Brittany Holtzapple A Concerned Retail Investor - Ape