Mar. 15, 2023
I am writing to submit my comments on S7-01-23, the proposed rule prohibiting conflicts of interest in certain securitizations. I commend the SEC for its efforts to strengthen the regulatory framework surrounding securitizations and eliminate conflicts of interest. However, I suggest that the proposed rule be revised to exclude exceptions for risk-mitigating hedging activities, bona fide market making, and certain liquidity commitments. Such exceptions would significantly undermine the effectiveness of the rule and create loopholes for securitizers to engage in conflicted practices. Furthermore, I urge the SEC to expand the scope of the proposed rule to cover collateralized debt obligations (CDOs) and other securitization transactions. CDOs have been a source of numerous conflicts of interest and abuses, and their inclusion in the rule would promote transparency, protect investors, and maintain the integrity of the financial markets. In conclusion, I appreciate the SEC's efforts to address conflicts of interest in securitizations and urge the agency to continue to strengthen the regulatory framework surrounding these transactions. Also, every rule the SEC passes is only as good as the enforcement behind it. I want to see much higher fines that serve as a significant deterrent. I think some broker-dealers should lose their licenses instead of receiving fines that equate, from their perspective as, nothing more than a cost of doing business - a cost that is often outweighed by the ill-gotten gains obtained through “honest mistakes”. I would happily pay 12 cents more a share to avoid being routed through a wholesaler that has been charged over 70 times by the United States government (https://files.brokercheck.finra.org/firm/firm_116797.pdf). I would gladly pay commission to avoid being routed through a wholesaler, especially a wholesaler with an extensive record of flouting the law like Citadel Securities. I fully support the harmonization of tick sizes across all exchanges. I was shocked to learn that some exchanges get special treatment and are able to leverage that special treatment to build monopolies in some areas of the market. All exchanges should have to quote AND trade in the same increments. Some exchanges shouldn’t be granted an unfair advantage over others. It leads to monopolistic control of parts of the market that counteract and eventually kill the positive benefits of competition. The markets are supposed to be fair and I believe we should strive as hard as possible to make them fair. I dislike the presence of rebates and other inducements in the marketplace - they are simply payment for order flow by another name. I would prefer you reduce access fees to zero; no "take". I support the tick size regime proposed by the Commission, and would also support any structure that is clear and does not rely on vague language. For example, some funds and firms might request language like "has a reasonable amount of liquidity at the NBBO", which translates to "I can ignore the rule if I feel my lawyers can help me get away with it". Loose, ambiguous language makes enforcement difficult / impossible, and wastes taxpayer money on needless litigation. Clear language and an unambiguous tick size rule structure are ideal. Please do not include vague or ambiguous language in the application of your rules (to the extent possible, these are complicated matters). I support the inclusion of odd lot information in the SIP, and applaud the Commission's efforts to provide individual household investors with more information with which to make better investing decisions - especially concerning which firms are allowed to handle our orders. Two years ago, the majority of trades in the markets were odd lots (55%; from https://bettermarkets.org/newsroom/key-highlights-dennis-kellehers-testimony-march-17-house-financial-services-gamestop-hearing/). For certain tickers, this proportion is certainly much higher. Why are the bids and offers of so many orders kept invisible? If the Commission were to remove odd lot information from this rule, my faith in the U.S. markets would be further eroded. I believe the exclusion of odd lots from the NBBO is a problem. Odd lots are now a majority of trades in the markets. Within some stocks, they are the vast majority. The exclusion of odd lots from the price of a stock amounts to the exclusion of most individual investors - most of the voting public. Please look into a way to fairly and proportionately include odd lots in the calculation of the NBBO. Thank you very much for your time and consideration. I am a household investor living in [REDACTED] -- Carol B. Dorr, PhD