May 4, 2024
Dear Securities and Exchange Commission, I am writing to express my concerns about the proposed rule change SR-OCC-2024-001 (34-99393) put forth by the Options Clearing Corporation (OCC). While I understand the need for regulatory adjustments in response to evolving market conditions, I find several aspects of the proposal troubling and potentially damaging to market stability and transparency. The proposed rule change seems to emphasize modifications in risk management protocols that may inadvertently shield risky positions during volatile market conditions. There is a potential conflict of interest in the role of the Financial Risk Management (FRM) Officer, who plays a key role in deciding which risks to expose to market stress and which to shield. Moreover, the redacted materials accompanying the proposal significantly limit the ability to fully understand its implications and assess its impact. Effective risk management mechanisms, such as margin calls, are critical to maintaining market stability by preventing unchecked risk exposure. The proposal appears to weaken these mechanisms, possibly resulting in heightened risk exposure without appropriate checks and balances. It is crucial to adjust risk management parameters in a manner that aligns with both individual and broader market interests. I urge a reassessment of the loss allocation framework. The current proposal places the OCC’s pre-funded resources before Clearing Fund deposits, which could lead to insufficient prioritization of the latter. I recommend a shift towards prioritizing Clearing Fund deposits to ensure robust loss absorption and market stability. Additionally, I propose the establishment of an independent review mechanism for impartial evaluation of control settings. This measure will enhance objectivity and build confidence in the risk management process. Transparency is vital in maintaining trust and promoting informed participation in financial markets. Therefore, I advocate for enhanced transparency measures, including providing non-confidential summaries of redacted materials. Strengthening oversight mechanisms and incorporating public input in decision-making processes will further ensure that regulatory changes are equitable and well-balanced. Collaboration with stakeholders to establish industry-wide standards and best practices is essential for promoting overall market stability. Public accessibility to stress testing results is equally important to demonstrate the effectiveness of risk management measures and to bolster market confidence. In conclusion, I am committed to fostering a financial environment that prioritizes fairness and transparency. I trust that the SEC will thoroughly consider these concerns and ensure that any changes implemented support a resilient, fair, and transparent market. Thank you for your attention to this important matter. Sincerely, Julien Peinado