Feb. 27, 2024
Hello and thank you for the opportunity to comment on SR-0CC-2024-001 34-99393. I fundamentally disagree with this proposal. The proposed rule to reduce margin requirements for at-risk Clearing Members contradicts OCC's own risk assessment, jeopardizing the primary defense line of "margin deposits." Instead, margin requirements should be increased to align with the risks, encouraging Clearing Members to manage portfolios for market stress and long-tail risks. The current proposal incentivizes excessive risk-taking, potentially leading to systemic issues. A "fourth line of defense" through external auditing and supervision, akin to the "four lines of defense model" for financial institutions, should be implemented with enhanced public reporting to preemptively identify and manage risks. To enhance protection and encourage responsible risk management, swap the order of loss allocation, prioritizing "Clearing fund deposits of non-defaulting firms" before "OCC's own pre-funded financial resources." This ensures Clearing Members police each other and allocates losses to the clearing corporation only after exhausting Clearing Member deposits, reducing the risk of a bailout for a systemically important clearing agency. In conclusion, rejecting the current proposal, subjecting it to public review, and approving it only with significant amendments is crucial for maintaining a fair, transparent, and resilient market. Thank you, Chris Lewer