Mar. 5, 2024
Dear Members of the Securities and Exchange Commission, I am writing to express my concerns regarding Rule SR-OCC-2024-001, which proposes adjustments to margin thresholds, specifically during periods of high volatility and I find certain aspects of this rule raise critical questions and introduce risks. The use of "idiosyncratic volatility control settings" to adjust margin thresholds during high volatility introduces a risk because it lacks transparency in the calculation and implementation process. Without clear guidelines on how these settings are determined, there is a potential for arbitrary or ad-hoc adjustments, allowing the Options Clearing Corporation (OCC) to alter the criteria whenever Clearing Members require assistance. This flexibility raises concerns about fairness, as it may create an environment where the rules can be changed based on individual circumstances, potentially favouring certain market participants or introducing an element of unpredictability. Such lack of transparency undermines the integrity of financial markets by eroding trust among participants. Financial markets thrive on clear and consistent rules that are applied uniformly to ensure a level playing field. When rules can be adjusted opaquely, it creates uncertainty and diminishes confidence in the regulatory framework. Maintaining trust is essential for the effective functioning of financial markets, and transparency in rule-making and enforcement is a key factor in upholding the integrity of the overall financial system. The proposal's supporting evidence, particularly regarding the calculation of margin thresholds, is troublingly redacted. This lack of disclosure undermines the principles of transparency and accountability that are crucial in regulatory frameworks. As stakeholders, we require detailed information on how these adjustments will be made to ensure fair and equitable treatment of all market participants. Moreover, the proposal grants unchecked authority to the Financial Risk Management (FRM) Officer to make unilateral decisions during periods of high market stress. This authority, while ostensibly intended to protect the interests of the OCC, raises questions about potential conflicts of interest. The FRM Officer is entrusted with safeguarding both the OCC's interests and those of at-risk Clearing Members, creating a potential conflict that needs addressing and changing. In light of these concerns, I urge the Securities and Exchange Commission to thoroughly review and reconsider the implications of Rule SR-OCC-2024-001. Clear guidelines, transparency in calculations, and checks and balances on discretionary authority are essential for maintaining the integrity and stability of the financial markets. Thank you for your attention to this matter. I trust that the SEC will carefully consider these concerns and take appropriate actions to address the potential risks associated with this rule. Sincerely, Emily Siggelkow