May 17, 2024
Subject: Concerns Regarding SR-OCC-2024-001: Proposed Rule Change by The Options Clearing Corporation To whom it may concern: I am writing to express my concerns about SR-OCC-2024-001, titled “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.” The basis of this letter is equally to express support and appreciation to the SEC in their rejection of this rule, with supporting encouragement for this decision and future outcome. The following items summarize my opposition to the proposed rule. Lack of Transparency: The proposal contains significant redactions, hindering meaningful public review and comment. Systemic Risk: Reducing margin requirements for Clearing Members, as proposed by the OCC, increases the risk to the stability of our financial system. Clearing members must meet their financial obligations; if they cannot, they must close their positions. Conflict of Interest: The Financial Risk Management Officer's role inherently conflicts with overseeing both the well-being of Clearing Members and the agency itself. Moral Hazard: Shifting the costs of Clearing Member defaults to the non-bank liquidity facility creates a moral hazard and perpetuates an unfair marketplace. Inadequate Risk Management: The proposal fails to properly manage liquidity risk and increases systemic risk, as evidenced by the OCC's reliance on reducing margin requirements. I also note and appreciate the reasons provided by the SEC in their rejection of this rule: Failure to promote the prompt and accurate clearance and settlement of securities transactions and safeguard securities and funds. Lack of clear and direct lines of responsibility in governance arrangements. Inadequate policies and procedures to cover credit exposures to participants and insufficient margin calculation to cover potential future exposure. In conclusion, I support the SEC's rejection of this proposed rule change to ensure the protection of all investors and the integrity of our financial markets. Thank you for considering my concerns and for your continued efforts to protect our markets. Sincerely, Tyler C.