Feb. 9, 2024
Dear SEC, I hope this message finds you well. I am writing to express my gratitude for the opportunity to comment on 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" (PDE, Federal Register). As a retail investor, I have carefully reviewed the aforementioned rule proposal and have several concerns that I believe are crucial to address. I would like to outline my concerns regarding the lack of transparency in our financial system, as exemplified by this rule proposal among others. The details provided in Exhibit 5, along with supporting information (see Exhibit 3), are significantly redacted, which inhibits public review and renders meaningful commentary on the proposal impossible. Therefore, I believe this proposal should be rejected solely on the basis of insufficient public review. Furthermore, public review is of particular importance considering the OCC's attribution of blame to U.S. regulators for failing to mandate the adoption of prescriptive procyclicality controls. Given the potential consequences of increasing margin requirements during periods of heightened volatility, transparency becomes paramount, especially considering the designation of the OCC as a Systemically Important Financial Market Utility (SIFMU). It is imperative that stakeholders dependent on the US financial system have access to transparent processes and regulations. The proposed rule appears to prioritize the protection of Clearing Members from realizing potentially costly trades by approving reductions in margin requirements, thus increasing risks to the OCC. This poses systemic risks due to insufficient capitalization and over-leverage among Clearing Members. The rule's implementation of "idiosyncratic" and "global" control settings, as well as the frequency of margin requirement reductions, creates an unfair marketplace for retail investors and other market participants. Moreover, the proposal reveals an inherent conflict of interest for the Financial Risk Management (FRM) Officer, whose role ostensibly aims to protect the OCC's interests but may paradoxically entail protecting Clearing Members from failure, potentially jeopardizing the OCC's stability. In light of these concerns, I respectfully suggest the following modifications to the rule proposal: 1. Enforce margin requirements commensurate with risks associated with Clearing Member positions. 2. Implement external auditing and supervision as a "fourth line of defense," similar to the model for financial institutions, with enhanced public reporting. 3. Swap the order of loss allocation within the OCC's Loss Allocation waterfall to prioritize Clearing fund deposits of non-defaulting firms before OCC's own pre-funded financial resources. I appreciate the opportunity to provide feedback, as I firmly believe that all investors benefit from a fair, transparent, and resilient market. Thank you for considering my comments. Warm regards, Daniel Rojas