Thank you for the opportunity to comment on SR-OCC-2024-001 34-99393 As a retail investor, I have several concerns about this rule proposal and would urge you to consider modifying it extensively. I have grave reservations about the lack of transparency and severe assymetry of power and influence in our financial system, as evidenced by this rule proposal,.along with the countless other means financial institutions have at their disposal, outside of "generous" regulatory advantage. At just a cursory glance, many details of this proposal have been substantially redacted preventing public review, thus making it impossible for the public to meaningfully comment on it. This alone is grounds enough to leave those outside "the industry" with significant concerns as to the intentions of the parties proposing these changes. Public review is of particular importance as the OCC’s Proposed Rule blames U.S. regulators for failing to require the OCC to adopt prescriptive procyclicality controls (“U.S. regulators chose not to adopt the types of prescriptive procyclicality controls codified by financial regulators in other jurisdictions.” (https://www.federalregister.gov/d/2024-01386/p-11). As “procyclicality may be evidenced by increasing margin in times of stressed market conditions” This particular OCC rule proposal appears designed to protect Clearing Members from realizing the risk of potentially costly trades by allowing reductions in margin requirements as required by Clearing Members; which would increase risks to the OCC. It can be seen that a systemic risk exists because Clearing Members as a whole are insufficiently capitalized and/or over-leveraged such that a single Clearing Member failure (e.g., from insufficiently managing risks arising from high volatility) could cause a cascade of Clearing Member failures. In other words, a Clearing Member who made bad bets on Wall St could trigger a systemic financial crisis because Clearing Members as a whole are all risking more than they can afford to lose. The OCC’s rule proposal attempts to avoid triggering a systemic financial crisis by reducing margin requirements using “idiosyncratic” and “global” control settings. Fundamentally, these rules create an unfair marketplace for other market participants, including retail investors, who are forced to face the consequences of long-tail risks while the OCC repeatedly waives margin calls for Clearing Members by repeatedly reducing their margin requirements. For this reason, this rule proposal should be rejected and Clearing Members should be subject to strictly defined margin requirements as other investors are. As per the OCC, this rule proposal and these special margin reduction procedures exist because, "a single Clearing Member defaulting could result in a cascade of Clearing Member defaults potentially exposing the OCC to financial risk." (https://www.federalregister.gov/d/2024-01386/p-79) Thus, Clearing Members who fail to properly manage their portfolio risk against long tail events become "Too Big To Fail." For this reason, this rule proposal should be rejected and Clearing Members should face the consequences of failing to properly manage their portfolio risk, including against long tail events. Clearing Member failure is a natural disincentive against excessive leverage and insufficient capitalization as others in the market will not cover their loss. This rule proposal codifies an inherent conflict of interest for the Financial Risk Management (FRM) Officer. While the FRM Officer’s position is allegedly to protect OCC’s interests, the situation outlined by the OCC proposal where a Clearing Member failure exposes the OCC to financial risk necessarily requires the FRM Officer to protect the Clearing Member from failure to protect the OCC. Thus, the FRM Officer is no more than an administrative rubber stamp to reduce margin requirements for Clearing Members at risk of failure. Unfortunately, simply facilitating margin requirement reductions for Clearing Members at risk of failure negates the protection from market risks associated with Clearing Member’s positions provided by the margin collateral that would have been collected by the OCC. For this reason, this rule proposal should be rejected and the OCC should enforce sufficient margin requirements to protect the OCC and minimize the size of any bailouts that may already be required. As the OCC’s Clearing Member Default Rules and Procedures (https://www.theocc.com/getmedia/e8792e3c-8802-4f5d-bef2-ada408ed1d96/default-rules-and-procedures.pdf) Loss Allocation waterfall allocates losses to “3. OCC’s own pre-funded financial resources” (OCC ‘s “skin-in-the-game” per SR-OCC-2021-801 34-91491)(https://www.federalregister.gov/documents/2021/04/12/2021-07454/self-regulatory-organizations-the-options-clearing-corporation-notice-of-no-objection-to-advance) before “4. Clearing fund deposits of non-defaulting firms”, any sufficiently large Clearing Member default which exhausts both “1. The margin deposits of the suspended firm” and “2. Clearing fund deposits of the suspended firm” automatically poses a financial risk to the OCC. As this rule proposal is concerned with potential liquidity issues for non-defaulting Clearing Members as a result of charges to the Clearing Fund, it is clear that the OCC is concerned about risk which exhausts OCC’s own pre-funded financial resources. With the first and foremost line of protection for the OCC being “1. The margin deposits of the suspended firm”, this rule proposal to reduce margin requirements for at risk Clearing Members via idiosyncratic control settings is blatantly illogical and nonsensical. By the OCC’s own admissions regarding the potential scale of financial risk posed by a defaulting Clearing Member, the OCC should be increasing the amount of margin collateral required from the at risk Clearing Member(s) to increase their protection from market risks associated with Clearing Member’s positions and promote appropriate risk management of Clearing Member positions. Strangely, increasing margin requirements is exactly what the OCC admits is predicted by the allegedly “procyclical” STANS model (https://www.federalregister.gov/d/2024-01386/p-8) that the OCC alleges is an overestimation and seeks to mitigate (https://www.federalregister.gov/d/2024-01386/p-16) In light of the issues outlined above, please consider the following modifications: A. Increase and enforce margin requirements commensurate with risks associated with Clearing Member positions instead of reducing margin requirements. Clearing Members should be encouraged to position their portfolios to account for stressed market conditions and long-tail risks. This rule proposal currently encourages Clearing Members to become Too Big To Fail in order to pressure the OCC with excessive risk and leverage into implementing idiosyncratic controls more often to privatize profits and socialize losses. B. Implement external auditing and supervision as a “fourth line of defense” similar to that described in [The “four lines of defence model” for financial institutions](https://www.bis.org/fsi/fsipapers11.pdf) with enhanced public reporting to ensure that risks are identified and managed before they become systemically significant. C. Swap “3. OCC’s own pre-funded financial resources” and “4. Clearing fund deposits of non-defaulting firms” for the OCC’s Loss Allocation waterfall so that Clearing fund deposits of non-defaulting firms are allocated losses before OCC’s own pre-funded financial resources and the EDCP Unvested Balance. Changing the order of loss allocation would encourage Clearing Members to police each other with each Clearing Member ensuring other Clearing Members take appropriate risk management measures as their Clearing Fund deposits are at risk after the deposits of a suspended firm are exhausted. This would also increase protection to the OCC, a Systemically Important Financial Market Utility, by allocating losses to the clearing corporation after Clearing Member deposits are exhausted. By extension, the public would benefit from lessening the risk of needing to bail out a systemically important clearing agency. Thank you for the opportunity to comment and propose these suggestions to facilitate a fairer and more secure financial market. Yours sincerely, Lewis Schofield