May 16, 2024
Dear SEC, As a retail investor, I appreciate the chance to comment on SR-OCC-2024-001. I support the SEC's grounds for disapproval due to several concerns about the OCC rule proposal and urge its rejection to ensure a fair and transparent market for all investors. The lack of transparency in the proposal, especially the significant redactions in Exhibit 5, hinders public review and meaningful commentary. Public scrutiny is crucial, particularly since the OCC blames U.S. regulators for not adopting prescriptive procyclicality controls. Increasing margin requirements during stressed market conditions is necessary to avoid exposing the OCC and its members to financial risks. This rule proposal appears to protect Clearing Members from the consequences of risky trades by reducing margin requirements, thereby increasing systemic risk. The OCC's repeated use of "idiosyncratic" control settings to reduce margin requirements over 200 times in less than four years is excessive and undermines market fairness. Fundamentally, these rules create an unfair marketplace by allowing Clearing Members to evade the consequences of long-tail risks, which retail investors must face. This perpetuates a "rules for thee, but not for me" environment, undermining the SEC's mission to maintain fair markets. Additionally, the OCC's reliance on Non-Bank Liquidity Facilities, including pension funds and insurance companies, for uncapped liquidity access is problematic. This combination of rules allows the OCC to manipulate market conditions to its advantage, potentially at the expense of pensions and insurance companies. Therefore, I support the SEC's disapproval based on the following: The rule fails to safeguard securities and funds under the clearing agency's control by improperly reducing margin requirements, increasing financial risk. It does not provide a clear and transparent governance arrangement, prioritizes Clearing Members' safety over the clearing agency, and lacks public interest protection. The rule fails to produce margin levels commensurate with risks and does not properly manage liquidity risk, increasing systemic risk. To ensure market stability and fairness, I recommend: Increasing and enforcing margin requirements commensurate with risks. Implementing external auditing and supervision with enhanced public reporting. Reordering the Loss Allocation waterfall to prioritize Clearing Members' deposits over the OCC's pre-funded resources. Immediately suspending and liquidating Clearing Members when losses exceed margin deposits. Reducing "single points of failure" by increasing redundancy and resiliency in financial markets. Thank you for the opportunity to comment and protect all investors through a fair and transparent market. Sincerely, A concerned retail investor