Feb. 24, 2023
February 24, 2023 Dear SEC Commissioner, I am writing to express my concerns about the proposed amendments to Rule 605 of Regulation NMS for order executions in national market system stocks. As a retail investor, I view the concept of best execution as nothing more than theft from the retail investor to enrich others. The proposed amendments aim to expand the scope of entities subject to Rule 605, requiring broker-dealers with a larger number of customer accounts, single dealer platforms, and entities that would operate qualified auctions to make available to the public monthly execution quality reports. While the goal of increasing transparency in order execution quality is commendable, I believe that the proposed amendments do not address the root of the problem. Firstly, the amendments would include certain orders submitted outside of regular trading hours and certain orders submitted with stop prices as covered orders, which could make it difficult for retail investors to place orders at the best possible price. This could lead to retail investors being left with less favorable prices and missing out on potential gains in the dark markets. Secondly, the proposed amendments would eliminate time-to-execution categories in favor of average time to execution, median time to execution, and 99th percentile time to execution statistics, each as measured in increments of a millisecond or finer. While this may seem like an improvement, the focus on speed of execution only benefits high-frequency traders who can take advantage of small price discrepancies to make quick profits. As a retail investor, I am more concerned with getting a fair price for my trades, rather than the speed of execution. Furthermore, the proposed amendments would require new statistical measures of execution quality that could be used to evaluate price improvement and size improvement for all order types, additional price improvement statistics for market and marketable order types, and certain statistical measures that could be used to measure execution quality of non-marketable limit orders. While these measures may sound impressive, they do not address the fundamental problem of market fragmentation, where orders are routed to different venues depending on their likelihood of being executed quickly and cheaply. I believe that the concept of best execution is inherently flawed, as it allows broker-dealers to prioritize their own interests over those of retail investors. Broker-dealers have the ability to route orders to venues where they receive the highest rebates, rather than where they are most likely to achieve the best price for their clients. This means that retail investors are effectively paying a hidden fee in the form of price slippage, which enriches broker-dealers at the expense of their clients. Furthermore, the proposed amendments would require all entities subject to Rule 605 to make a summary report available, which would be formatted in the most recent versions of the XML and PDF formats as published on the Commissions website. While this may make the reports more accessible, I believe that the information contained in these reports is not useful to retail investors. Most retail investors lack the knowledge and expertise to interpret these reports and use them to make informed trading decisions. In conclusion, while the proposed amendments to Rule 605 may aim to increase transparency in order execution quality, I believe that they do not address the root of the problem. The concept of best execution is fundamentally flawed, and only benefits broker-dealers at the expense of their clients. Instead of focusing on increasing transparency, I urge the SEC to address the issue of market fragmentation, where orders are routed to different venues based on rebates rather than the likelihood of achieving the best price. Only then can retail investors be assured of getting a fair price for their trades. Sincerely, Jacob Gillmore