May 7, 2024
Dear Commision, I am commenting on this rule in order to SUPPORT the SEC's decision to disapprove of the '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'. Here's why: Covered Clearing Agencies are designed to promote the prompt and accurate clearance and settlement of securities transactions, derivative contracts, etc. and to assure the safeguarding of securities and funds which are in the custody or control of the clearing agency or for which it is responsible; [Refer to 15 U.S.C. 78q-1(b)(3)(F)], and... Rule 17Ad-22(e)(2) of the Exchange Act,15 which requires that a covered clearing agency provide for governance arrangements that, among other things, specify clear and direct lines of responsibility; and... Rule 17Ad-22(e)(6) of the Exchange Act, which requires that a covered clearing agency establish, implement, maintain, and enforce written policies and procedures reasonably designed to cover, if the covered clearing agency provides central counterparty services, its credit exposures to its participants by establishing a risk-based margin system that, among other things, (1) considers, and produces margin levels commensurate with, the risks and particular attributes of each relevant product, portfolio, and market, 17 and (2) calculates sufficient margin to cover its potential future exposure to participants in the interval between the last margin collection and the close out of positions following a participant default. With these rules in place and seeing what the OCC is trying to accomplish with this rule change is extremely worrying, since the OCC is an SRO and also plays an important role in the stability of the financial system. Not only does this warrant the need for more transparency, but the OCC MUST DO ITS JOB in addressing market risk and making sure that the clearing members remain adequately capitalized, ESPECIALLY during idiosyncratic events and through periods of high volatility. What would happen if the OCC is able to reduce margin requirements? The clearing members that are engaging in risky bets and are not properly capitalized are able to dig a deeper hole, thus not solving the initial problem and creating an even larger threat to financial stability. If the SEC wants to avoid this, then a disapproval of this proposed rule change by the OCC is non-negotiable. Also, I would like to point out that the fact that the OCC is trying to change the rules in this manner is highly suspect and risks losing even more trust from the public. It's very clear that the OCC would rather help the dangerous trading practices by it's members rather than making sure that the investing public remains safe from these financial parasites. I'm sure that the SEC takes this proposal very seriously, and as a retail investor I would like to express my appreciation to the SEC for keeping this commenting period open and also for laying out the reasons for disapproval in the rule change proposal, which clearly indicated the reasons why the OCC should NOT be allowed to change the rules at a time when it suits only them and the clearing members that poorly capitalized themselves, this is no one's fault but the OCC and the clearing members. Until next time, Concerned Retail Investor