Apr. 01, 2023
To whom it may concern, I am writing to express my support for the proposed Regulation Best Execution. As an individual investor, I believe that best execution is of utmost importance in trade execution. It can be complex to choose how to execute a trade, and clear guidance on how to read and interpret the data in Regulation NMS Rule 605 reports would be beneficial, especially for retail investors who may not have a deep understanding of the markets. Brokers owe their customers a duty of Best Execution derived from common law agency principles and fiduciary obligations, and it is important that this becomes a rule that the SEC can enforce. Conflicted orders should not be part of a Best Execution rule, as they can result in customers being unaware of revenue arrangements between brokers and subpar trading firms, leading to higher transaction prices. Different trading venues may offer different prices, and slower execution can lead to missed opportunities. Information leaks can inhibit a successful transaction, and less reliable settlement processes can delay receipt of proceeds. Without the best execution rule, customers may not be aware of these issues. In December 2020, Robinhood was charged by the SEC with failure to satisfy its best execution obligation, resulting in an aggregate loss of $34.1 million for its customers. Robinhood made misleading statements and did not disclose payments received for routing trades to specific firms. Similarly, Citadel paid the SEC $22.6 million in 2017 to settle best execution charges for executing customer trades at less favourable pricing when a better price was available. Brokers recommending mutual funds with 12b-1 fees and revenue sharing arrangements with clearing brokers have also faced best execution charges from the SEC. Quarterly reviews of execution quality would provide transparency and accountability for the broker-dealers' practices. The proposed rule would provide a more detailed and comprehensive standard for broker-dealers to follow, resulting in consistently robust best execution practices. The proposed Regulation Best Execution is a necessary step in protecting household investors and promoting fair and efficient markets by ensuring that household investors are receiving the best possible execution for their trades. Thank you for your time and attention. Sincerely, CM