Jan. 31, 2024
Dear Securities and Exchange Commission, I'm writing to share my concerns about the proposed rule change by the Options Clearing Corporation (OCC) regarding margin requirements in times of high market volatility. As a household investor, I care deeply about the stability and fairness of the financial market. The current proposal might unintentionally protect risky financial positions from normal risk management, like margin calls, during turbulent markets. This could let investors with risky moves avoid needed adjustments, possibly leading to bigger losses and harming long-term market stability. I'm particularly worried about the role of the Financial Risk Management (FRM) Officer, whose main duty is to protect OCC's interests. This creates a conflict, as OCC's interests may not always match the broader market's well-being. The lack of transparency in redacted materials also raises questions and limits our ability to fully evaluate the proposal. While I understand OCC's aim to manage risks during high volatility, it's crucial to make sure these measures don't accidentally protect bad decisions. Adjusting margin requirements is important for market stability, but it should align with broader market interests. Given the concerns, I suggest reconsidering the OCC's loss allocation framework. Currently, it places Clearing Fund deposits of non-defaulting firms as the fourth layer of defense. I propose prioritizing these deposits over OCC's pre-funded resources to promote fairness and transparency. To address these concerns, I recommend additional safeguards and modifications to the rule. One example is an independent review mechanism to assess the impact of control settings on OCC's interests and the broader market. This would reinforce transparency and accountability, ensuring an unbiased evaluation of risk management practices. Other recommendations include prioritizing transparency, enhancing oversight mechanisms, involving public input through consultations, and establishing industry-wide standards. These suggestions aim to strengthen oversight, transparency, and accountability for the integrity and fairness of our financial markets. As a committed investor, I trust the SEC will carefully consider these concerns in the rulemaking process to uphold market integrity. Sincerely, Benjamin Lyddon Household Investor