Mar. 4, 2024
Dear Securities and Exchange Commission, Thank you for the opportunity to comment on OCC proposal SR-OCC-2024-001. Risk is a fundamental consideration in margin calculations and dealing appropriately with risk is of utmost importance to the interconnected market participants who have membership with the OCC. It is noteworthy that a significant portion of the proposal is redacted regarding the actual specific changes to margin calculations and so the only comment I can make on that point is that lack of transparency facilitates corruption. In regards to the portions of the proposed rule SR-OCC-2024-001 which deal with changes to the idiosyncratic margin requirements, the proposal would increase risk instead of decreasing it. The idea that idiosyncratic risk can be identified a priori and volatility in the markets assumed to be temporary and price swings in particular securities bi-directional (averaging out to a small change after volatile conditions) is demonstrably a false basis for discretionary power to change the margin requirements. 1) If the SEC is interested in a fair market, then the rules should apply equally across all securities. The OCC needs to lay out clear margin rules which do not rely on the sole discretion of a Financial Risk Manager to excuse or change the calculations to "save" a member threatened with default. Such behavior only encourages degradation to risk management considerations in the first place. 2) If the SEC is interested maintaining an orderly market, the rules should manage risk assuming the future is not known and volatile markets causing margin requirement increases is not a bad thing but incentivises risk management appropriate to the environment that exists (not the one we may wish to exist). The models used for projecting risk are useful but do not predict the future with granular accuracy. Decreasing margin today may very well imperil more actors tomorrow if the projected volatility does not act as expected. 3) If the SEC is interested in an efficient market, then allowing for poor risk management to result in less than desirable outcomes is both good and necessary. "Too big to fail" is a clear failure as a structural feature of the markets largest players. The proposed rule SR-OCC-2024-001 is problematic in these regards and the SEC would do well to fully assess and address these concerns which may require revision to the rule. Thank you again for the opportunity to comment and for your dedication to ensuring a fair, sound and resilient market for us all. Sincerely, Retail Investor