Mar. 31, 2023
To Whom it may Concern: When you're trading as an individual investor, it's important to get the best execution possible. But with all the complexities involved, it can be hard to know how to choose the best way to execute a trade. That's why it's important for brokers to provide clear guidance on how to read and interpret Regulation NMS Rule 605 reports, especially for those who may not have a deep understanding of the markets. It's not just about common sense, brokers also have a legal duty to provide their customers with best execution based on common law agency principles and fiduciary obligations. But this needs to become an SEC rule that can be enforced. Conflicted orders should not be a part of this rule. Without a best execution rule, customers may not realize that their brokers have revenue arrangements with subpar trading firms or that they may be paying higher transaction prices. Different trading venues can offer different prices, and slower execution can lead to missed opportunities. Information leaks and unreliable settlement processes can also cause problems. In December 2020, Robinhood was charged by the SEC for failing to meet its best execution obligation, resulting in a loss of $34.1 million for its customers. Robinhood had made misleading statements and didn't disclose payments it received for routing trades to specific firms. Similarly, Citadel paid $22.6 million in 2017 to settle best execution charges for executing customer trades at less favorable pricing when a better price was available. Brokers who recommend mutual funds with 12b-1 fees and revenue sharing arrangements with clearing brokers have also faced best execution charges. To ensure transparency and accountability, broker-dealers should conduct quarterly reviews of execution quality. The proposed Regulation Best Execution would provide a more detailed and comprehensive standard for broker-dealers to follow, resulting in consistently robust best execution practices. Ultimately, the proposed regulation is an important step in protecting individual investors and promoting fair and efficient markets. It ensures that household investors receive the best possible execution for their trades, and that brokers act in their customers' best interests. Thank you for taking your time to read my comments, Sincerely, Matthew Shaw