May 5, 2024
I appreciate the opportunity to provide feedback on the proposed rule change by The Options Clearing Corporation (OCC) regarding adjustments to margin requirement parameters during periods of heightened volatility. As a retail investor, I have several concerns regarding this proposal and cannot support its approval. Firstly, the lack of transparency in the proposal is troubling. Significant redactions in the documents hinder public review and input, undermining the integrity of the regulatory process. Without full disclosure, meaningful engagement becomes challenging. Secondly, the proposal's handling of systemic risk and procyclicality raises alarms. By reducing margin requirements for Clearing Members during volatile periods, the OCC aims to mitigate risks. However, this approach may incentivize excessive risk-taking and create an uneven playing field for market participants. Moreover, the inherent conflict of interest for the Financial Risk Management (FRM) Officer is concerning. While tasked with protecting OCC's interests, the officer may face pressure to prioritize the interests of Clearing Members, potentially compromising risk management efforts. To address these issues, I propose the following modifications: 1. Increase and enforce margin requirements based on the risks associated with Clearing Member positions, discouraging excessive risk-taking. 2. Implement external auditing and supervision to enhance transparency and ensure robust risk management practices. 3. Adjust the loss allocation waterfall to prioritize clearing fund deposits of non-defaulting firms before OCC's own pre-funded financial resources. This would incentivize Clearing Members to monitor each other and reduce the risk of systemic failures. In conclusion, transparency, fairness, and resilience are paramount in our financial markets. I urge careful consideration of these concerns and the implementation of necessary modifications to uphold market integrity and protect investor interests. Thank you for the opportunity to provide feedback. https://www.federalregister.gov/documents/2024/01/25/2024-01386/self-regulatory-organizations-the-options-clearing-corporation-notice-of-filing-of-proposed-rule#