May 4, 2024
Thank you for the opportunity to provide feedback on SR-OCC-2024-001 34-99393 titled "Proposed Rule Change by The Options Clearing Corporation Concerning 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 Experience High Volatility." As a retail investor, I have several concerns about the OCC's rule proposal, cannot support its approval, and appreciate the chance to comment. My primary concern revolves around the lack of transparency within our financial system, exemplified by this rule proposal among others. The extensive redaction of details within the proposal and supporting documents hinders public review, rendering meaningful feedback impossible. Without full public scrutiny, rejecting the proposal becomes necessary solely on this basis. Public scrutiny becomes particularly crucial given the OCC's attribution of blame to U.S. regulators for not mandating prescriptive procyclicality controls. Given the potential risks associated with margin adjustments during volatile market conditions, transparency is paramount, especially considering the OCC's status as a SIFMU. The proposed rule appears to prioritize protecting Clearing Members from potential losses by frequently reducing margin requirements, potentially increasing risks to the OCC. This approach creates an unfair environment for other market participants, including retail investors, who must bear the brunt of long-tail risks while Clearing Members benefit from reduced requirements. To address these issues, it's imperative to reconsider the proposed rule's approach: 1. **Enhance margin requirements:** Instead of reducing requirements, they should be increased and strictly enforced to encourage Clearing Members to manage their portfolios more effectively, mitigating systemic risks. 2. **External oversight:** Introduce external auditing and supervision akin to the "four lines of defense" model for financial institutions, ensuring risks are identified and managed preemptively. 3. **Modify loss allocation:** Alter the OCC's Loss Allocation waterfall to prioritize clearing fund deposits of non-defaulting firms before OCC's pre-funded resources, incentivizing Clearing Members to police each other and providing additional protection to the OCC. These adjustments would promote a fair, transparent, and resilient market, benefiting all investors. Sincerely, A Concerned Canadian Retail Investor invested in the US stock market . I urge the SEC to do the right thing.