Apr. 01, 2023
Dear SEC, I am writing to express my concern about the payment for order flow (PFOF) practice and unfair market practices in the US markets. As an investor in the stock market, I am concerned about the conflicts of interest and the unfair advantages that PFOF and other market practices provide to certain entities. The ban on PFOF in the UK due to conflicts of interest concerns is a clear indication that the practice should be banned in the US markets as well. Brokers who do not accept any kind of PFOF route orders differently and consequently see superior execution quality. Retail investors who do not deal with PFOF get a better price than those who do, violating FINRA's Best Execution guidance. FINRA is currently evaluating the impact of not charging commissions on member firms' order-routing practices and decisions, and the findings should be made public. It is important to address any conflicts of interest that may arise due to commission-free trading. Furthermore, a recent study found that Robinhood does not provide statistically significant price improvement relative to exchanges, despite PFOF being responsible for around 70% of its revenue. This is concerning as it shows that the practice of PFOF is not providing any benefits to retail investors. TD Ameritrade's order routing decisions do not seem to be motivated by competition, despite what they state on their website. They pay to get the first look at orders, routing them to firms that net themselves billions of dollars in the process. This practice is unfair and violates the principles of fair competition. Also Dark pools (Alternative Trading Systems) should provide quotes and trades to consolidated market data to bring more transparency to dark markets. The Commission should address the unfair information advantage of wholesalers by having brokers first route to the auction and specify where the order should go if the auction is unsuccessful. Wholesalers exercise extreme influence on other market participants, and there are conflicts of interest that may infect the ability of some participants to objectively review the rules. They take billions from individuals and institutions and call it "superior performance" while lying about the quality of their services to maintain their profits. Removing middlemen from the market will improve prices for both individuals and institutions, such as pension funds. Fair competition is essential for the market to function effectively. The state of American markets is anti-competitive, with off-exchange systems dominating. The Commission needs to ensure fair competition, especially within the off-exchange systems that currently dominate. The proposed rule to bring more transparency to dark markets should be implemented as soon as possible to address the lack of transparency. In conclusion, I urge the SEC to take swift action against PFOF and other unfair market practices. The Commission should ensure fair competition by reducing monopolistic behavior and removing profiteering middlemen from the market. The SEC should investigate conflicts of interest among market participants to ensure that participants can objectively review the rules. Thank you for your attention to this matter. Sincerely, Andrei Litz