Feb. 15, 2024
Dear Securities and Exchange Commission: I am writing to comment on SR-OCC-2024-001 34-99393 entitled “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 household investor. This particular OCC rule proposal appears designed to protect Clearing Members from realizing the risk of potentially costly trades by rubber stamping reductions in margin requirements as required by Clearing Members; which would increase risks to the OCC. Per the OCC rule proposal: The OCC collects margin collateral from Clearing Members to address the market risk associated with a Clearing Member’s positions. [3] OCC uses a proprietary system, STANS (“System for Theoretical Analysis and Numerical Simulation”), to calculate each Clearing Member's margin requirements with various models. One of the margin models may produce “procyclical” results where margin requirements are correlated with volatility which “could threaten the stability of its members during periods of heightened volatility”. [2] An increase in margin requirements could make it difficult for a Clearing Member to obtain liquidity to meet its obligations to OCC. If the Clearing Member defaults, liquidating the Clearing Member positions could result in losses chargeable to the Clearing Fund which could create liquidity issues for non-defaulting Clearing Members. [2] I am in full opposition to this rule for the following reasons: (1) the rule creates greater judgement-proof status for financial institutions and incentives more extreme risk taking (evident in current derivatives liabilities between the biggest banks); (2) it curtails autonomy theory of morality and pluralist theory of fair and just dealing in favor of faux "market efficiency" as a thin veneer for a lack of consequences; (3) it indirectly removes the burden of potential consequences and loss from the OCC and participating members through creating one sided outcomes; (4) there are large financial institutions and insurance policies in place to provide liquidity in the event of defaults. Instead, I propose that we introduce stricter margin requirements to decentivize reckless risk taking from our largest financial institutions, increase reporting requirements, increase damages and criminal liabilities for infractions, and reward responsible behaviors. Sincerely, A Concerned Household Investor SW