Mar. 1, 2024
Dear SEC, The OCC is playing with fire and will create a catastrophe. I appreciate the opportunity to comment on SR-OCC-2024-001 34-99393 concerning The Options Clearing Corporation's proposed rule change. As a retail investor, I have several concerns about this proposal and do not support its approval. My primary concern is a reliance on reducing margin requirements to protect Clearing Members from costly trades, potentially increasing risks to The Options Clearing Corporation (OCC). This strategy may exacerbate systemic risks, as Clearing Members could become overleveraged, leading to cascading failures. Furthermore, the lack of transparency surrounding this rule proposal. The redaction of key details in Exhibit 5 and supporting information (Exhibit 3) inhibits public review and meaningful commentary. Transparency is crucial in our financial system, and without it, the proposal should be rejected. The OCC's use of "idiosyncratic" and "global" control settings to reduce margin requirements for Clearing Members appears to create an unfair advantage for these entities, leaving other market participants, including retail investors, exposed to long-tail risks. Additionally, the proposal highlights a conflict of interest within the OCC's Financial Risk Management (FRM) Officer role. The FRM Officer's responsibility to protect OCC's interests may conflict with the need to protect Clearing Members from failure, potentially undermining risk management efforts. In light of these concerns, I urge the SEC to consider the following modifications: Increase and enforce margin requirements for Clearing Members to mitigate risks associated with their positions. Implement external auditing and supervision, similar to the "four lines of defense" model for financial institutions, to enhance risk management and transparency. Adjust the loss allocation waterfall to prioritize Clearing fund deposits of non-defaulting firms before OCC's own pre-funded financial resources, incentivizing Clearing Members to manage risks effectively. Thank you for considering my comments. A fair, transparent, and resilient market benefits all investors. Sincerely, A Concerned Retail Investor