Mar. 07, 2023
I first began participating in the markets as a household investor right when I turned 18. Back then, I had to pay $5 for every buy or sell order I made, which was significant when I was working part-time for less than $10/hr. However, such fees are the only fair way to participate in the market - payment for order flow (PFOF) just results in price manipulation that hurts household investors. With $5/transaction fees, I still managed to consistently earn a modest but not insignificant 10% return. With PFOF, household investors are selling data on their positions that allows market makers and wholesalers to make bets against those positions. They (household investors) trade for free, but end up losing value on their investment. Similarly, I dislike the presence of rebates and other inducements in the marketplace; they are simply PFOF by another name. I would prefer you reduce access fees to zero - no "take."
I support the harmonization of tick sizes across exchanges and for all market participants - household investors or otherwise. If a market participant is allowed to trade by a fraction of a penny, they have an unfair advantage. It is inexcusable to claim markets are fair when some participants are given such objective preferential treatment.
However, another unfair advantage wholesalers boast is that "odd lot" orders are not currently affecting NBBO. I fully support the inclusion of odd lot information in the SIP, and applaud the Commission's efforts to provide individual investors with more information with which to make better investing decisions - especially concerning which firms are allowed to handle our orders.
Finally, all of these rules are only a modest step forward in bringing fairness to our markets, so the most important aspect of their implementation - the only way they will make our markets better - is to enforce the rules. The rules must be written in clear, objective language and must avoid any vague clauses that allow bad actors to get around the effect the rules should have. At a minimum, violations should be subject to fines greater than the revenue captured by the violation. Ideally, participants who violate rules should be barred from operating in our markets.