Feb. 22, 2024
I am writing to express my deep concern about the proposed rule SR-OCC-2024-001, which outlines The Options Clearing Corporation's (OCC) process for adjusting margin requirements during periods of high volatility. As a participant in the financial markets, I am committed to upholding transparency, fairness, and stability, and the current proposal raises several red flags that threaten these fundamental principles. While I understand the OCC's aim to codify its adjustment process, the lack of transparency in the specifics of parameter and margin threshold calculations is troubling. Without clear insight, market participants like myself cannot properly assess the fairness and effectiveness of these risk management measures. This information asymmetry breeds distrust and hinders our ability to make informed decisions. The rule's reliance on idiosyncratic control settings, the concentration of decision-making power in a single FRM Officer, and the potential for systemic risks linked to frequent adjustments during volatility are alarming. Essentially, the proposal grants the OCC significant discretion to reduce margin requirements based on undisclosed parameters during critical market moments. This lack of clarity could exacerbate risks and erode market confidence. Additionally, the absence of public input during the rule-making process raises questions about its inclusivity and fairness. Open dialogue with stakeholders, including myself, is vital to ensure comprehensive rules that address the concerns of various market participants. Leaving out crucial voices can lead to unintended consequences and erode trust in the system. To address these concerns, I urge you to consider several improvements: Strengthen and enforce margin requirements: Robust margin requirements are essential to ensure market stability, especially during volatile periods. Introduce external auditing and supervision: Independent oversight is crucial to maintain transparency and accountability in the application of the rule. Incorporate public input: Meaningful engagement with stakeholders throughout the rule-making process fosters trust and leads to more inclusive regulations. Enhance transparency requirements: Providing clear and detailed information about parameters, thresholds, and decision-making processes is essential for building trust and ensuring fairness. Implementing these suggestions will demonstrate a commitment to transparency, accountability, and a level playing field for all market participants. Ultimately, this is how we can work together to ensure the stability and integrity of our financial markets. I strongly oppose the adoption of SR-OCC-2024-001 in its current form and urge a thorough reconsideration that incorporates the critical improvements I have outlined. Thank you for considering my concerns. Sincerely, Jake H.