May 4, 2024
Dear SEC Officials, I am writing as a concerned retail investor in response to the proposal SR-OCC-2024-001 regarding the reduction of margin requirements for clearing members, as outlined in the documents provided by the SEC and the Options Clearing Corporation (OCC). I appreciate the opportunity to comment on this matter as it affects all market participants and, ultimately, the stability of the financial system. After reviewing the SEC’s disapproval notice and the details within the proposed rule change, I am compelled to express my support for the SEC's stance as the proposal seems to inadequately protect the financial market during periods of high volatility. The proposed reductions in margin requirements, as indicated in the documents SR-OCC-2024-001 and Federal Register references, could potentially increase systemic risks, undermine the financial stability of the markets, and compromise investor protection. **Key Concerns:** 1. **Lack of Transparency and Accountability:** Details in the proposed rule change are heavily redacted, limiting public insight and meaningful commentary. The lack of transparency undermines trust in the process and hinders effective public participation in safeguarding the financial system. 2. **Potential for Increased Systemic Risk:** By reducing margin requirements, the OCC might be enabling clearing members to maintain higher levels of leverage, which could lead to a cascade of failures if one or more members default, as evidenced by past financial crises. 3. **Unfair Market Conditions:** The proposed rule appears to disproportionately benefit larger market players by allowing them to manage their risks at the expense of the broader market, including retail investors like myself. This creates a moral hazard and a "too big to fail" scenario, placing undue burden on the stability of the financial system. 4. **Violation of SEC’s Mission:** The rule does not align with the SEC's mission to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation. Particularly, it fails to comply with essential sections of the Exchange Act that require safeguards and risk management practices commensurate with the scale of potential risks. **Recommendations:** - Uphold rigorous margin requirements that correlate with the level of risk posed by the trading activities of clearing members. - Increase oversight and impose stricter transparency requirements to ensure that all market participants can make informed decisions and understand the implications of rule changes. - Prioritize stability and investor protection in rulemaking to prevent any rules that could potentially amplify systemic risks or create unequal advantages. I trust that the SEC will continue to scrutinize such proposals thoroughly and uphold standards that ensure the long-term stability and fairness of the U.S. financial markets. Thank you for considering my concerns and allowing the public to participate in this essential dialogue. Sincerely, Corbin Schmucker, concerned retail investor