Feb. 8, 2024
I am writing to express my concerns regarding the proposed rule change outlined in SR-OCC-2024-001 34-99393, 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" (PDF, Federal Register). As a retail investor, I have thoroughly reviewed the proposal and have several concerns that I believe warrant careful consideration. Firstly, the lack of transparency surrounding this proposal, particularly evident in the redacted details presented in Exhibit 5 and supporting documentation (see, e.g., Exhibit 3), is troubling. This lack of transparency inhibits meaningful public review and feedback, undermining the integrity of the regulatory process. Without full public disclosure and opportunity for review, the proposal should be rejected. Furthermore, the proposal's attribution of blame to U.S. regulators for the lack of prescriptive procyclicality controls raises concerns about the efficacy of current regulatory oversight. The potential consequences of increased margin requirements during periods of market stress, as highlighted in the proposal, underscore the need for robust risk management practices and transparent regulatory frameworks. The proposal's reliance on "idiosyncratic" and "global" control settings to mitigate systemic risk introduces additional complexities and potential inequities within the marketplace. By repeatedly reducing margin requirements for Clearing Members, the proposal may inadvertently create an unfair advantage for certain market participants while exposing the OCC to heightened financial risks. In light of these concerns, I urge the Securities and Exchange Commission to consider the following modifications to the proposed rule change: Increase and enforce margin requirements commensurate with the risks associated with Clearing Member positions to encourage prudent risk management practices. Implement external auditing and supervision mechanisms to enhance transparency and accountability in risk management processes. Reevaluate the Loss Allocation waterfall to prioritize the protection of non-defaulting Clearing Members and the OCC's pre-funded financial resources. These modifications aim to promote a fair, transparent, and resilient market environment that benefits all investors. Thank you for considering my comments on this important matter. Sincerely, Danielle J