May 4, 2024
I am writing to express my strong opposition to the proposed rule change under SR-OCC-2024-001 entitled "Proposed Rule Change by Options Clearing Corporation Regarding 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 are subject to high volatility. The implications of this proposal are deeply concerning and threaten to jeopardise the fairness, transparency and stability of our financial markets. Lack of transparency: the extensive redactions in Appendix 5 and supporting information impede meaningful public scrutiny and comment, essential pillars of fair regulation and market integrity. Accountability: the OCC's attempt to shift blame to US regulators for failing to implement more stringent controls demonstrates a worrying lack of accountability and transparency within the regulatory framework. Systemic Risk: The proposal's focus on reducing margin requirements for clearing members ignores the systemic risk posed by potential defaults and prioritises short-term gains over long-term market stability. Conflict of Interest: The proposal establishes a conflict of interest for the Financial Risk Management Officer that undermines the fundamental purpose of risk management and regulatory oversight. Inadequate protection: By not enforcing risk-appropriate margin requirements, the proposal exposes the OCC and other market participants to increased financial risk and shifts the burden of clearing member defaults to non-bank liquidity facilities, leading to moral hazard. Clarity of governance: The governance arrangements set out in the proposal lack transparency and clear accountability, which further undermines confidence in the regulatory process. Exploitation of position: Exploitation of the OCC's status as a single point of failure and attempts to force approval of the proposal set a dangerous precedent for self-serving behaviour at the expense of market integrity. Stronger safeguards needed: Rather than reducing margin requirements, the proposal should prioritise stronger safeguards, external scrutiny and transparent governance to prevent systemic risk and protect investors. Immediate action required: Immediate suspension and liquidation of clearing members when projected losses exceed certain thresholds is essential to prevent escalating problems and maintain market stability. Reducing systemic risk: Promoting redundancy and resilience in financial markets is critical to minimise systemic failures and avoid bailouts that undermine market integrity. In conclusion, I urge you to reject the proposed rule change under SR-OCC-2024-001. Maintaining fair markets, protecting investors and ensuring the stability of our financial system requires immediate action and comprehensive measures to address these critical issues. Thank you for considering my concerns. Yours sincerely Thomas H. Pawlik Kiefernweg 26, 50999 Köln, Germany Fon +49 221 • 935 90 18 Fax +49 221 • 935 90 20 Mob +49 171 • 317 49 20 This e-mail may contain confidential and/or privileged information. If you are not the intended recipient (or have received this e-mail in error) please notify the sender immediately and destroy this e-mail. Any unauthorized copying, disclosure or distribution of the material in this e-mail is strictly forbidden.