May 4, 2024
Dear Sir or Madam, I appreciate the opportunity to provide feedback on SR-OCC-2024-001 Release No 34-100009 regarding the proposed rule change by The Options Clearing Corporation (OCC) concerning its process for adjusting margin requirements during periods of high volatility. I support the SEC's consideration for disapproval due to concerns about the lack of transparency in the financial system, as evidenced by significant redactions in the proposal, hindering meaningful public review. The proposed rule suggests reducing margin requirements for Clearing Members facing high volatility risks. However, this approach may increase systemic risk and unfairly privilege certain market participants. Clearing Members should be subject to strictly defined margin requirements to ensure fairness and market stability. Additionally, the role of the Financial Risk Management (FRM) Officer appears conflicted, prioritizing Clearing Members' interests over the clearing agency's and potentially undermining risk management efforts. The proposed rule also raises concerns about the OCC's reliance on non-bank liquidity facilities, potentially shifting costs to pension funds and insurance companies and creating moral hazards. To address these issues, I recommend: Increasing and enforcing margin requirements commensurate with risks associated with Clearing Member positions. Implementing external auditing and supervision for enhanced transparency and risk management. Revising the loss allocation waterfall to prioritize non-defaulting Clearing Members' contributions over OCC's pre-funded financial resources. Implementing proactive measures to suspend and liquidate Clearing Members at risk of default to prevent systemic risks from escalating. Enhancing market redundancy and resiliency to reduce reliance on single points of failure. Thank you for considering these comments for the protection of all investors and the integrity of our financial markets. Sincerely, Darrell Lagace