Feb. 12, 2024
Dear Sir/Madam, I'm writing to express my profound concerns regarding the proposed rule change by the Options Clearing Corporation (OCC) pertaining to the adjustment of parameters for calculating margin requirements during periods of heightened market volatility. As a stakeholder deeply invested in the stability and integrity of financial markets, I feel compelled to address several critical issues that warrant thorough reconsideration. I am troubled by the redaction of specific details, which impedes market participants from assessing the fairness and effectiveness of OCC measures. This lack of transparency in risk management processes raises significant doubts regarding the integrity and reliability of regulatory decisions. The proposal's general guidelines for idiosyncratic control settings' duration introduce uncertainty and discretionary power, further eroding confidence in the predictability and stability of OCC risk management practices. Moreover, the reliance on idiosyncratic control settings, particularly during periods of high volatility, poses systemic risks to the financial ecosystem. Frequent waivers of margin calls may indicate a lack of robustness in risk management practices, jeopardizing market stability and investor confidence. The proposal's categorization of Clearing Members as "Too Big To Fail" exacerbates worries regarding the stability of the financial system. By favoring the safeguarding of Clearing Members over the mitigation of systemic risks, the proposal fosters moral hazard and weakens market discipline. If approved, the rule change exposes the OCC to significant financial risks by potentially depleting pre-funded resources in the event of a large Clearing Member default. This not only undermines the first line of protection outlined in OCC's default rules but also raises questions about the sustainability of OCC's risk management approach and its ability to withstand systemic shocks. In light of these concerns, I urge you to undertake a thorough reconsideration of the proposed rule change. It is imperative that regulatory decisions are guided by principles of transparency, accountability, and risk mitigation to uphold the stability and resilience of financial markets. Sincerely, Lars Wohlfahrt