Jun. 13, 2022
Dear Commissioners at the SEC, I could not find the specific rule # to comment on regarding limiting or banning payment for order flow, so I am writing directly. I hope this message finds you all well. I wanted to reach out regarding the commentary period for reviewing payment for order flow (PFOF). Most of the news I've heard regarding PFOF relates to day-traders, high frequency traders, meme stock traders, and other fringe applications that are not reflective of a typical American investor. As such, I wanted to ensure the regular American investor gets some attention when considering these rules as well. Mainly, there have been some great investing developments enabled by commission-free trades that I am concerned will be undone as collateral damage from changing PFOF operations. I certainly recognize that PFOF can distort the priority for who's orders get executed, and thus the best prices may not be given to a given investor based on when their order was placed. As a result, suboptimal pricing may be afforded to market orders. However, this does not appear to cost limit order investors, and furthermore seems most pertinent to people trading extremely high volumes or very high frequency, which are institutions or the wealthy, not a typical, responsible, investing citizen. Namely, Robinhood, TD Ameritrade, and other zero commission trade platforms have facilitated the most viable means for an average American to safely and routinely invest to build wealth slowly and responsibly in the stock market. Zero-commission trading has permitted me to allocate my income into a series of recurring weekly investments into a diversified basket of equities on a regular basis. Each week, I put part of my earned income into roughly 15 different stocks and index funds. This permits amazing dollar-cost averaging, and requires little effort for me to maintain. Since I am routinely buying every week, missing a few cents on a given trade due to PFOF distortions is not my concern. Based on my years of listening to advice from moderate investing voices (Warren Buffet, Fool.com, etc), I have come to believe that the most reasonable and responsible method for average Americans to build wealth in the market is to routinely buy a diverse basket of investments, with dollar-cost averaging as the ideal approach. If PFOF is banned and markets start charging commissions again so I have to pay $5, $10, or $20 per trade (as I used to), you will be preventing this approach as a viable strategy for small-level investors. I.e., if I need to pay even $5 to execute a $50 market order in a basic company every week, I'm starting with a 10% penalty, and can no longer afford small, incremental, accumulation of investments. This will push me back to riskier investment management, trying to time entry points into the market for large orders, likely with more rotations and other foolhardy approaches to game my investments with the news cycle. I sincerely appreciate your consideration of my perspective during your review of how to manage PFOF regulations. I hope this perspective, where PFOF permits zero-commission trading to facilitate responsible new strategies for average American investors, is weighed relative to the headlines of the high frequency traders and meme stock traders. We may not be as news-worthy, but please look beyond the profiteers more interested in gaming a system for quick profit, and instead towards those of us who are responsibly and slowly investing in American businesses over time to share in their growth and prosperity for the long-term. Best Regards, Robert Neal