May 13, 2024
Dear Commissioners, I am writing to express my strong support for the Securities and Exchange Commission's decision to reject the Options Clearing Corporation's (OCC) proposed rule change, as outlined in Release No. 34-100009; File No. SR-OCC-2024-001. My support is grounded in concerns regarding transparency, risk mitigation, and investor protection, which I believe are crucial to maintaining a fair and robust financial market. The OCC's proposal to codify its process for adjusting margin requirements during periods of high volatility lacks sufficient transparency. The current description in the STANS Methodology fails to provide detailed procedural clarity on how parameter controls are implemented, changed, and terminated. This obscurity could prevent stakeholders, including investors and market participants, from fully understanding the criteria and mechanisms that trigger these adjustments, thus undermining the foundational market principle of transparency. Moreover, adjusting margin requirements based on proprietary settings during volatile market conditions introduces significant systemic risk. The proposed rule change does not adequately address how these adjustments would be made in a manner that ensures stability across the financial system. Given that margin requirements are designed to secure performance and mitigate default risk under normal market conditions, any ad hoc adjustment during volatility could unintentionally exacerbate financial instability. This is particularly concerning in a scenario where multiple clearing members are simultaneously subjected to abrupt, opaque margin calls, potentially triggering a cascade of financial distress. Additionally, the role of the Financial Risk Management (FRM) Officer in overseeing these adjustments raises potential conflicts of interest. The proposal does not clearly delineate checks and balances that would prevent the FRM Officer from making decisions that might disproportionately benefit specific parties or undermine the impartiality expected in such a critical role. Effective governance demands a clear separation of duties and robust oversight mechanisms to ensure decisions are made in the best interest of all market participants and the stability of the broader financial system. In conclusion, while I recognize the OCC's intent to enhance its risk management framework, the current proposal as outlined fails to meet the rigorous standards required for a transparent, stable, and fair financial market. I urge the SEC to consider these concerns in detail and support your decision to reject the proposed rule change. Ensuring that all regulatory adjustments are made with the highest degree of transparency and oversight is essential to protecting investors and maintaining confidence in our financial markets. Thank you for considering my views on this matter. I appreciate the SEC's ongoing commitment to upholding the integrity of the financial markets and safeguarding investor interests. Respectfully, GL