February 20, 2025

Ms. Vanessa Countryman
Secretary
U.S. Securities and Exchange Commission
100 F Street NE
Washington, D.C. 20549-1090

RE: File No. SR-OCC-2024-010; Notice of Filing of Amendment No. 3 to Proposed Rule Change by the Options Clearing Corporation (“OCC”) To Establish a Margin Add-On Charge That Would Be Applied to All Clearing Member Accounts to Help Mitigate the Risks Arising From Intraday and Overnight Trading Activity

Dear Ms. Countryman:

The Securities Industry and Financial Markets Association (“SIFMA”)¹ submits this comment letter to the Securities and Exchange Commission (the “Commission”) in response to OCC’s initial proposal (“Initial Proposal”),² as amended by Amendment No. 3 (“Amended Proposal”),³ to establish a margin add-on charge (“Intraday Risk Charge”) that would be applied to all Clearing Member accounts to help mitigate the risks faced by OCC from intraday and overnight trading activity. SIFMA recognizes OCC’s need to appropriately address the risks it faces related to the significant increase in trading of so-called “zero-days-to-expiration” or “0DTE” options, as well as its need to address the Commission’s new intraday margining requirement to which it is now subject.⁴ In this respect, we appreciate that OCC made some changes in the Amended Proposal intended to address certain concerns raised by commenters.

However, we note that many of our suggestions and concerns on the Initial Proposal from our October 15, 2024 comment letter (“October Letter”) remain unaddressed in the Amended Proposal.⁵ In light of OCC’s intent (as demonstrated by the Amended Proposal) to move forward with its current approach to establish an Intraday Risk Charge, we call upon OCC to roll out the Intraday Risk Charge in phases—first applying it only to 0DTE activity of its Clearing Members and then, after review, consider expanding its coverage to other trading activity if necessary—and then ultimately sunset it when OCC is able to develop a more robust, tailored, and risk-sensitive intraday margining approach in its new clearing system Ovation, which we would expect should take no more than two years. We also ask OCC to consider and respond to commenters’ unaddressed suggestions and concerns regarding the Initial Proposal, including why OCC did not follow the suggested, and potentially less disruptive, ways in which OCC could have proceeded to address intraday risks.⁶

As discussed below, we have several concerns with the Amended Proposal as well as further recommendations for the OCC to consider with respect to the Intraday Margin Charge. Specifically:

• While we appreciate some of the changes OCC made in the Amended Proposal, several of the changes are relatively minor and the OCC should respond to the outstanding recommendations made by commenters on the Initial Proposal, including SIFMA’s comments.
• The OCC should apply the Intraday Risk Charge to the most relevant trading activity first—starting with the primary risk-increasing activity OCC has identified, 0DTE options transactions—and then, after review, determine whether to expand it to other cleared activity if necessary.
• The OCC should sunset the Intraday Risk Charge within the next two years, which will be enough time for it to develop and implement a new, more tailored and risk-sensitive approach to intraday margining using the Ovation system.

Concerns with the Amended Proposal

As noted in our October Letter, SIFMA recognizes the potential systemic risks faced by OCC related to both the significant increase in trading of 0DTE options as well as the normal accrual of intraday risk and acknowledges OCC’s need to address these risks within a reasonable timeframe. In our letter, we noted that the Initial Proposal is too broad and blunt an approach to address these risks, and that its failure to appropriately tailor the Intraday Risk Charges to Clearing Members’ actual levels of trading activity could have significant negative impacts on the listed options business of SIFMA members and the overall liquidity and quality of the listed options market. We also provided several constructive suggestions of alternative approaches for OCC to consider that are designed to more appropriately tailor its approach to addressing the risks identified by OCC from intraday trading activity. SIFMA was not alone in expressing concerns about the Initial Proposal, as several other commenters expressed similar concerns.⁷

In response to some of these comments, OCC amended the Initial Proposal through Amendment No. 3. In that amendment, OCC is proposing to (i) narrow the window over which the Intraday Risk Charge would be calculated to between 11:00 a.m. to 12:30 p.m. Central Time (“CT”), (ii) remove any reference to the Intraday Risk Charge with respect to the Intraday Monitoring Thresholds and limit the issuance of margin calls to a single intraday collection time at or around 12:00 p.m. CT, (iii) clarify that intraday margin calls would be issued at a single intraday collection time, and any margin calls outside of the collection time must be approved by the Chief Financial Risk Officer, Chief Executive Officer, Chief Operations Officer, or Chief Risk Officer, (iv) provide FRM Officers with discretion on whether to issue or not issue a margin call based on certain facts and circumstances, while also requiring the documentation of such decisions, and (v) extend the implementation timeframe from within 120 days of approval to September 2025 to align with the projected Ovation release date, and potentially provide more time for industry participants to prepare for the proposed rule change.

Overall, we appreciate OCC’s decision in the Amended Proposal to narrow the window over which the formula used to calculate the Intraday Risk Charge will be applied, which will result in a reduction of total margin collected versus the Initial Proposal by approximately $870 million. We also appreciate that OCC included actual dollar amounts regarding the impact of the proposal on various segments of the listed options market, as this information helps SIFMA members better understand the potential monetary impact they would face under the Amended Proposal.

1. SIFMA is the leading trade association for broker-dealers, investment banks and asset managers operating in the U.S. and global capital markets. On behalf of our industry’s one million employees, we advocate on legislation, regulation and business policy affecting retail and institutional investors, equity and fixed income markets and related products and services. We serve as an industry coordinating body to promote fair and orderly markets, informed regulatory compliance, and efficient market operations and resiliency. We also provide a forum for industry policy and professional development. SIFMA, with offices in New York and Washington, D.C., is the U.S. regional member of the Global Financial Markets Association (GFMA). For more information, visit http://www.sifma.org. [↩]
2. See Release No. 34-100664 (Aug. 6, 2024), 89 FR 65695 (Aug. 12, 2024). [↩]
3. See Release No. 34-102202 (Jan. 15, 2025), 90 FR 7722 (Jan. 22, 2025). [↩]
4. See Release No. 34-101446 (Oct. 25, 2024), 89 FR 91000 (Nov. 18, 2024). [↩]
5. See (https://www.sec.gov/comments/sr-occ-2024-010/srocc2024010-529655-1522002.pdf). [↩]
6. See Release No. 34-101193 (Sept. 25, 2024), 89 FR 79977 (Oct. 1, 2024) (designating a longer period for Commission action on the Proposal and soliciting additional comments on it). [↩]
7.  See (https://www.sec.gov/comments/sr-occ-2024-010/srocc2024010.htm). [↩]