May 4, 2024
Dear SEC, This proposed rule change by the Options Clearing Corporation (OCC) is a blatant attack on fair and orderly markets and must be firmly opposed. Allowing the OCC to unilaterally reduce margin requirements for clearing members at risk of default is like endorsing fraud and moral hazard on a systemic scale. The lack of transparency, with critical information hidden from the public, is reason enough to reject this proposal outright. Without full disclosure, there can be no meaningful review or accountability, fueling public distrust in the financial system. But the revealed details are even more concerning. The OCC is blaming regulators for not letting it loosen its risk controls enough, asking for permission to expose itself and the entire system to more failures. This goes against the purpose of a self-regulatory organization meant to safeguard market integrity. The proposed ability to waive margin calls for undercapitalized clearing members is a brazen attempt to privatize profits while pushing losses onto others. Ignoring risk models that suggest higher requirements is financial negligence. Clearing members taking reckless risks should face consequences, not have risk conveniently swept away over 200 times in under 4 years as the OCC proposes. Fundamentally, this rule promotes a "rules for thee, but not for me" mentality, opposed to the SEC's mission. Shielding clearing members from margin calls unfairly burdens other investors with long-tail risks. It's alarming that a single clearing member default could threaten the entire OCC, indicating dangerous overleveraging and undercapitalization. Instead of addressing this vulnerability, the OCC wants more leeway to bend risk parameters for its dysfunctional members, perpetuating the "too big to fail" doctrine. Reducing margins to prevent a default ignores that managing exposure is a clearing member's responsibility. This proposal undermines financial resilience and demands liquidity backstops from pensions and insurers. It's a desperate attempt to privatize profits while socializing losses, threatening the savings of millions. There are no reasonable grounds for the SEC to approve such a dangerous proposal. It neglects regulatory responsibilities, fails to protect investors, ignores public interests, disregards transparent governance, and flouts loss-bearing requirements. This proposal symbolizes the worst aspects of modern finance's addiction to moral hazard and socialized risk-taking. Regulators must mandate higher margin requirements, subject the OCC to external audits, shift loss-bearing responsibilities, swiftly shutter insolvent clearing members, and disperse systemic vulnerability across a decentralized market structure. Risky bets must be backed by commensurate capital, not hidden behind waivers that harm the public. This proposal is a betrayal of regulatory duty and must be unequivocally rejected. The SEC must uphold its principles and steer toward truly accountable markets. Sincerely, A Concerned Retail Investor