Jan. 31, 2024
Dear Securities and Exchange Commission, I am writing to oppose the rule change by the Options Clearing Corporation (OCC) to adjust parameters for calculating margin requirements during periods of high market volatility. The proposed rule appears to inadvertently shield risky financial positions from the normal risk management mechanism of margin calls during periods of high market volatility. Typically, margin calls serve as a protective measure, requiring investors to add funds or securities to cover potential losses when the value of their positions falls below a certain threshold. By restricting or preventing margin calls during turbulent market conditions, the proposal may allow investors with imprudent risks to avoid necessary adjustments. This lack of a risk management mechanism could lead to unchecked growth in risky positions, potentially contributing to larger losses and posing concerns for long-term market stability. While acknowledging OCC's intent to mitigate risks during high volatility periods, it is imperative to ensure that risk management measures do not inadvertently shelter bad bets. Adjusting parameters for calculating margin requirements is crucial for market stability, but this must be done in a way that aligns with broader market interests. In light of these concerns, I propose additional safeguards and modifications to the rule. One example includes, considering an independent review mechanism to assess the impact of control settings on both OCC's interests and the broader market. This measure is essential to reinforce transparency and accountability within the regulatory framework, ensuring an unbiased evaluation of risk management practices. By involving external experts, this safeguard not only mitigates potential conflicts of interest but also fosters public trust and confidence in the regulatory process. It aligns with the broader goal of upholding market integrity, providing a robust mechanism for continuous improvement and adaptability in response to evolving market dynamics. Additionally, enhancing transparency by providing non-confidential summaries of redacted materials would enable a more informed public discourse and promote a more inclusive decision-making process. Other recommendations for refining the proposed rule include; To conclude, as an engaged investor, I am committed to fostering a financial environment that prioritises fairness, transparency, and the well-being of all market participants. I trust that the SEC will thoroughly consider these concerns during the rule making process and work towards a rule that not only addresses risk management but also upholds the broader principles of market integrity. Sincerely, Nestor Torres