May 4, 2024
To the Securities and Exchange Commission, I am submitting revised comments in response to the Commission's decision to initiate proceedings for further analysis on the Options Clearing Corporation (OCC)'s Proposed Rule Change. This review is essential to ensure that any amendments align with Section 17A of the Exchange Act and its implementing rules, particularly those that prioritize effective market operations and the safeguarding of securities and funds. **Enhanced Financial Stability**: The proposal to adjust margin requirements during high-volatility periods could introduce significant risks. For example, if the new margin settings are too lenient, they might enable excessive risk-taking akin to behaviors observed prior to the 2008 financial crisis. Such settings conflict with Rule 17Ad-22(e)(6), which mandates a margin system that reflects real-time market conditions and participant exposures. I recommend that OCC incorporate more dynamic risk assessments that adapt to changing market conditions without predefined triggers that could be exploited. **Governance and Clear Lines of Responsibility**: According to Rule 17Ad-22(e)(2), OCC's governance arrangements should clearly delineate responsibilities concerning margin settings adjustments. The current proposal lacks sufficient detail on how responsibilities are divided among committees and executives, which could lead to ambiguities during critical periods. It would be beneficial for OCC to outline specific roles and accountability mechanisms in their governance framework to enhance clarity and operational integrity. **Compliance with Regulatory Requirements**: As required by Section 17A(b)(3)(F) and Rule 17Ad-22(e)(6), OCC must ensure that its margin policies promote the prompt and accurate clearance and settlement of transactions and protect the securities and funds it oversees. The proposed rule should explicitly state how it will achieve these objectives, particularly under scenarios of extreme market stress. This could include stress testing results and adjustment thresholds that are periodically reviewed and adjusted in response to real-world events. In conclusion, while the intent behind the Proposed Rule Change is to enhance market stability, the current format could inadvertently weaken the financial system's integrity and expose it to greater risks. I urge the SEC to require OCC to revise the proposal to include detailed, robust risk management strategies and clearer governance structures before considering approval. Such measures will ensure that the margin adjustment methodologies are both effective and prudent, maintaining market integrity and safeguarding all participants. Thank you for the opportunity to provide further input on this critical issue.