May 3, 2024
I appreciate the opportunity to comment SR-OCC-2024-001 34-99393, entitled "Proposed Rule Change by The Options Clearing Corporation Concerning Its Process for Adjusting Certain Parameters in Its Proprietary System for Calculating Margin Requirements During Periods When the Products It Clears and the Markets It Serves Experience High Volatility", and share my thoughts on the legislation as a retail investor. I support the SEC's reasons for disapproval under consideration, as I have similar problems that this proposal may introduce. I myself to not support its approval, and believe it would steer regulation and oversight away from a fair, orderly, efficient, and safe market. The first issue is the caliber of redacted details and information from various portions of the proposal. The majority of the proposal is "Redacted Pursuant to Rule 24b-2", giving the public a fraction of the content that is to be voted on. The OCC is asking to pass legislation that mostly can't be shared with the public, which should be ground for dismissal by itself. You would not ask a jury to convict when given only the name and charge of the defendant. The OCC claims it is the fault of U.S. regulators choosing "not to adopt the types of prescriptive procyclicality margin in times of stressed market conditions" (from Release No. 34-99393, File No. SR-OCC-2024-001). Given that the OCC is designated as a SIFMU, which the United States financial system's stability depends on, it stands to reason that whoever relies on the U.S. financial system has the right to transparency on potential legislation/regulation that will ultimately impact them. From what can be seen by the public, this OCC rule proposal seems structured to provide Clearing Members from their potential costly trades, by adjusting down the margin requirements needed by Clearing Members. The arguments made in support of this proposal are the potential risks that come from the Clearing Members in question, and their impact on other Clearing Members. This potential case scenario has been seen play out, with the collapse of Lehman Brothers in the housing crisis from 2008, where the failure of one financial institution snowballed into the failures of numerous other institutions in a short time period. Much like then, there exists the risk of a systemic financial crisis because Clearing Members may be entering positions that provide more of a risk than they can afford, hence this OCC rule proposal to offer a solution. The OCC is looking to avoid triggering such a financial crisis by reducing margin requirements for Clearing Houses, who have over-leveraged their portfolios and taken risks that they should not have in the first place. The OCC has consistently waived margin calls for Clearing Members in the past five years, as well as implemented "global" control settings in relation to long tail events, such as the economic reaction to the COVID-19 pandemic and the labelled "meme-stock" incident from January of 2021. As its core, these proposed rules continue to create a divide between large "too big to fail" financial institutions and other market participants, including retail investors, specifically in terms of bail-outs and consequences. While retail investors get no assistance for taking on risky investments, the OCC has, on numerous occasions, waived margin calls for Clearing Members by reducing their margin requirements many times. Instead of continuing to bail these groups out, they should be given the same strictly defined margin requirements that other investors follow. Passing rules such as these would only worsen the issue of double standards that exists in the markets today, summed aptly in the phrase "rules for thee, but not for me." These rules would be another insult to a fair, free market. As such, I stand with the SEC and their disapproval for this rule proposal. Once again, I appreciate the opportunity to comment in pursuit of the protection of any and all investors, as we all benefit from a fair, transparent, and resilient market. Sincerely, A Concerned Retail Investor