Jan. 25, 2024
I am writing concerning rule SR-OCC-2024-001. I am greatly concerned about any rule that would allow members to take on greater risks, and/or accumulate risk, at the expense of the market and potentially retail investors such as myself. Particularly worrisome would be allowing margins to be relaxed in times of high volatility. Models to analyze risks aren't without flaws, and in times of market volatility, it is not the time to be tweaking parameters to let bad bets slide. Members who take unecessary risks and place large bad bets need to be margin called early. I would go further and say that these members may need to be removed from the market such that their reckless behavior can be abolished from the system. Otherwise, you are just allowing members to take riskier and riskier bets that will inevitably result in larger collapses of the system. I would suggest that instead of relaxing requirements in times of stress, models have to be pro-active, and collect higher margins in times of low volatility, in anticipation that higher volatility will eventually occur. If the higher margins are collected on bad bets before they turn sour, then the defaulting member will not become an unbearable cost to the system. You should adjust your algorithm to search for the following, and impose higher margin requirements from: 1) members who are already taking over-leveraged risks 2) members with large short positions on stocks against which there are large short positions, thus are at higher risk of short squeeze 3) members with big options positions on stocks against which there are large option bets, causing the volatility in the first place The stock market exists so that individuals can buy stocks, and sell stocks that they already own. Everything else, short positions, options, swaps, etc... Everything else is enabling the toxic gambling behavior that puts the stock market at risk. One would not allow someone to bet in the casino without paying first, and retail investors are always required to pay with cold hard cash to buy stock. The same standard needs to become the norm with members who have the ability to place large bets. You're trying to navigate the high seas with the smallest boat possible, instead of building a boat that will comfortably withstand the weather. Thank you for reading this, and hopefully you will protect retail from big gamblers, rather than attempt to protect big gamblers from themselves.