Mar. 27, 2023
March 27, 2023 If the SEC does not enforce its rules, then it is a superfluous organisation, there to give the illusion of regulation while market makers and broker-dealers manipulate the market with impunity because the consequences of paltry fines that are barely noticeable in the context of their massive profits render the deterrent inconsequential and therefore not a deterrent at all. Fines for practices that degrades the fairness of markets must be dramatically higher than they are currently, they must be high enough to nullify the profits of those who manipulate the market, and that is the base level of efficacy for a deterrent. I am also strongly in favour of broker-dealers being stripped of their licenses as punishment for market manipulation as that would remove their ability to persist in said practice. I fully support the rule and wish it to be implemented as soon as possible. I also am very in favour of the reduction of order flow timing which damages the integrity of the markets. Further, I think it is important to consider the importance of competition in regards to financial markets where a vast amount of order flow is siphoned to alternative trading systems, i.e. dark pools, where transparency is virtually non existent and the routing of such orders is captured off exchange by a small group of off exchange dealers, with 66% captured by two firms. These firms maintain their dominant position through anti-competitive practices, like payment for order flow. If an external party controls the flow of trade, they control the price. If the price is controlled, then price discovery does not exist. If price discovery does not exist, then the market has no integrity and there is no reason for a non financial institution (such as the average person) to wish to invest. The current state of the market is also a perilous place for many companies seeking investment, to find that they can have their stock price suppressed or significantly reduced at the whim of an entity who has undue influence over trade flow and timing, which can have disastrous consequences for the investment seeking company. In fact, it is strongly indicated by research, that the liquidity that market makers supposedly are vital in providing, is harmed by internalisation. Citation: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4070056 A simpler, more transparent market, without uneccessary middle men who exist solely to profit by inserting themselves between trading flow, is more beneficial to the functioning of the market and the confidence of those investing. Here is a quote from David Lauer that encapsulates the negative influence that market makers exert: \"Wholesalers are lying about the quality of their services to maintain their profits and it makes me sick. For example, Commission analysis of CAT data in infra Table 20 found that, on average, 51% of the shares of individual investor marketable orders internalized by wholesalers are executed at prices less favorable than the NBBO midpoint. Out of these individual investors shares that were executed at prices less favorable than the midpoint, on average, 75% of these shares could have hypothetically executed at a better price against the non-displayed liquidity resting at the NBBO midpoint on exchanges and NMS Stock ATSs.\" It is clear to me that removing the profiteering middlemen from the market will improve prices for both individuals and institutions (e.g. pension funds). Recent research by Hittal Mittesh suggests that on top of the Commission's estimate that the auctions would save individuals from billions of dollars taken by wholesalers, it would also save institutions over $1.5 billion each year. Wholesalers are taking from both citizens and pensions: that needs to be stopped. Citation: https://4982966.fs1.hubspotusercontent-na1.net/hubfs/4982966/BestEx Research Order Competition Rule Analysis 20230105.pdf