Mar. 1, 2024
Dear Commissioners, I am writing to formally express my concerns regarding the proposed rule change by the Options Clearing Corporation (OCC) outlined in SR-OCC-2024-001. While I appreciate the complexities inherent in margin requirement calculations during volatile market periods, the rule change raises several critical issues that merit careful reconsideration. Transparency Concerns: The lack of transparency evidenced by the extensive redaction of materials related to the proposal is unsettling. A transparent process is fundamental to public trust and the robust functioning of our markets. It is crucial that all stakeholders have access to the same information to understand the rationale behind significant regulatory shifts. The redacted information hinders the ability of the public to fully comprehend and provide meaningful feedback on the proposal. Risk Management and Practicality: The introduction of discretionary, idiosyncratic controls over margin requirements could inadvertently amplify market stress during volatile times, contrary to the OCC's mandate to ensure market stability. The rule change may lead to margin spirals that exacerbate liquidity constraints, further complicating market dynamics in stressed conditions. Accountability Concerns: The proposed rule seems to grant significant discretionary power to the Financial Risk Management (FRM) Officer without a clear and transparent framework for decision-making. This poses a conflict of interest and a lack of checks and balances. The FRM Officer's decisions can have broad implications, and without a rigorous oversight framework, there is a risk of decisions that may not align with the broader market's well-being. Advocacy for Enhanced Oversight: Given these concerns, it is my conviction that the SEC should insist on a more stringent framework for the proposed changes. There should be a clear, predefined schedule for idiosyncratic margin changes with external oversight and periodic reviews. Additionally, scenario-based stress testing and the implementation of a Loss Allocation Waterfall resilience measure could provide more stability and fairness in decision-making. Conclusion and Recommendations: I urge the SEC to require the OCC to provide unredacted materials to ensure a fully informed public discourse. Furthermore, it is imperative to establish a more robust oversight mechanism for the FRM Officer's discretionary actions and to prioritize risk mitigation strategies that safeguard the entire financial ecosystem. In conclusion, while I support the goal of ensuring the OCC's risk management is responsive to market conditions, it is essential that such changes are made with full transparency, accountability, and fairness to all market participants. I thank you for the opportunity to comment and strongly advocate for a thorough review and adjustment of the proposed rule to align with these principles. Respectfully, Elias König