Mar. 31, 2023
Hi I support this rule to provide transparency to how orders are being executed and that it is fair within the system, such that no party has an unfair advantage over other parties competing in the same open market. It is also important to note that the rule must carry a significant fine and/or impact (suspension of license to operate) to whoever breaks the rule, such that it deters them from considering it as a "cost of doing business"; the penalty has to be such that it impacts their profit enough that the best and optimal way to maximize profits is to follow the rule. 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. Question is how much did they make/profit in comparison to the $34.1 million? This data point could be used to adjust the penalty on a sliding scale to deter this from happening. Robinhood made misleading statements and did not disclose payments received for routing trades to specific firms. There is an obvious conflict of interest with Robinhood and their partner firms, and household investors. Again, if they're willing to not provide best execution, it's because they're still profiting and they're not being held accountable in such a way to deter such actions. 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. Similar to Robinhood, it would be a data point to use to understand what their profit was for not executing at the better price, and make sure the penalties/suspensions are adjusted in such a way to deter this from happening in the future. 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, Vinh