Mar. 27, 2023
I am writing to express my support for the proposed changes to Alternative Trading System (ATS) rules, which would promote better alignment with regulatory frameworks for exchanges, benefiting individual household investors. However, I believe that there are several additional measures that the SEC should consider to ensure greater transparency and fairness in the securities markets. Firstly, the SEC should reduce conflicts of interest by increasing transparency in the routing of orders by brokers and wholesalers, with investors having access to the best priced quotations available in the National Market System (NMS). This can be achieved by requiring ATS to submit detailed disclosures about their operations, including how they manage conflicts of interest, how they operate their order routing practices, and how they handle customer orders. Secondly, ATS should establish and enforce written policies and procedures to prevent fraudulent and manipulative practices as well as enforcement that would ban fraudulent participants from participating in the future. This would help to protect individual investors from abusive practices in the ATS market. ATS should also provide detailed information about the operation of their systems to the SEC, including data on the execution of orders, order routing practices, and information about the use of dark pools. Thirdly, I believe that ATS should operate in a manner that is consistent with the broader regulatory structure of the securities markets, which would benefit individual investors by promoting fair and transparent trading practices. Additionally, ATS should implement a variable minimum pricing increment model for both quoting and trading of NMS stocks which would further promote fair and transparent pricing across trading venues, ultimately benefiting investors. Furthermore, sending orders to a wholesaler for internalisation should not be allowed. When orders don’t hit lit exchanges, it gives insider information about order flow to Brokers which should be illegal. PFOF should be removed. Lastly, I believe that the SEC should prioritize creating a competitive market structure that benefits investors and encourages transparency. The estimated savings for retail investors range from $1.12 billion to $2.35 billion, primarily through increased competition to supply liquidity to marketable orders. Therefore, it is crucial that the SEC continues to identify and prevent fraudulent practices that undermine the credibility, integrity, and functionality of American markets. Thank you for considering my comments on this important matter. Michael Shipe Director Marketing & Communications IM-Rec Sports at University of Virginia