Feb. 26, 2024
Esteemed Members of the Securities and Exchange Commission, I am writing to express profound reservations regarding the proposed Rule SR-OCC-2024-001, which seeks to amend margin thresholds, particularly in times of heightened market volatility. Upon thorough examination, certain facets of this rule raise pivotal inquiries and unveil potential risks that warrant meticulous scrutiny. The utilization of “idiosyncratic volatility control settings” to modulate margin thresholds amidst periods of heightened market turbulence introduces a notable risk due to its inherent lack of transparency in both its formulation and application processes. The absence of lucid guidelines delineating the parameters for determining these settings harbors the potential for arbitrary or ad-hoc adjustments, thereby affording the Options Clearing Corporation (OCC) considerable latitude to recalibrate criteria as per the exigencies of Clearing Members. Such discretionary latitude may engender an environment wherein rules can be subject to modification based on individual exigencies, thereby possibly conferring undue advantages upon select market participants or instigating an element of unpredictability. This opacity in rule-making undermines the fundamental trust upon which financial markets thrive. Financial markets hinge upon the bedrock of clear and consistent regulatory frameworks, applied uniformly to ensure a level playing field for all stakeholders. The ability to adjust rules opaquely engenders uncertainty and saps confidence in the regulatory apparatus. Upholding trust is paramount for the effective functioning of financial markets, and transparency in rule-making and enforcement is indispensable for preserving the integrity of the broader financial ecosystem. Moreover, the paucity of disclosed evidence pertinent to the calculation of margin thresholds within the proposal is disconcerting. This dearth of transparency detracts from the principles of accountability and transparency that form the cornerstone of robust regulatory frameworks. As stakeholders, we necessitate granular insights into the modus operandi behind these adjustments to ensure equitable treatment for all market participants. Furthermore, the conferred discretionary authority upon the Financial Risk Management (FRM) Officer during periods of heightened market distress warrants meticulous examination. While ostensibly intended to safeguard the interests of the OCC, this discretionary power raises pertinent questions regarding potential conflicts of interest. Entrusting the FRM Officer with the dual mandate of safeguarding the OCC’s interests while concurrently advocating for at-risk Clearing Members poses a potential conundrum necessitating diligent resolution. In light of these profound concerns, I beseech the Securities and Exchange Commission to undertake a comprehensive review and reconsideration of the ramifications associated with Rule SR-OCC-2024-001. The imperative for clear guidelines, transparency in calculations, and checks and balances on discretionary authority cannot be overstated in upholding the integrity and stability of financial markets. I extend my heartfelt gratitude for your attention to this pressing matter. I am confident that the SEC will conscientiously deliberate upon these concerns and undertake requisite measures to mitigate the potential risks posed by this rule. Respectfully, Household Investor