Mar. 30, 2023
March 30, 2023 Tick Sizes, Access Fees, and Transparency of Better Priced Orders S7-30-22 Rebates and other inducements in the marketplace are simply payment for order flow by another name. They lead to trading for the sake of volume. I support establishing a variable minimum pricing increment model that would apply to both the quoting and trading of NMS stocks, which are stocks listed on a national securities exchange, regardless of trading venue. The proposed amendments to Rule 610 would reduce the level of the access fee caps, which limit the fees that can be charged for trading against the best priced quotations displayed in any market. This is a start, but Id like to see exchange rebates completely eliminated. While PFOF is primarily seen as an off-exchange inducement to route orders to wholesalers, exchange fee structures and rebates play a similar role in order routing decisions. These inducements should not exist and should be banned. The Commission and FINRA have long recognized the problems that these inducements create, and despite the best efforts of regulators, these problems have not been addressed or solved. Access fee caps act effectively as a rebate cap. As the Commission notes in the NMS Proposal: analysis suggests that the primary reason that access fees remain near 30 mils on most exchanges is to fund rebates. As the Commission stated in harmonizing quote and trade increments for both on- and off-exchange trading, investors may benefit overall from harmonizing trading and quoting increments regardless of the effect on price improvement because of the potential long-term competitive effects. The access fee cap should be complemented with a rebate cap for Wholesaler PFOF in much the same way that it constrains Exchange PFOF. A universal fee and rebate cap in this context would be sensible and consistent with the overall objectives of The Proposals. Since exchanges are able to markup their market data costs between 201% and 4,891% while being allowed to pay rebates to brokers, the Commission should ensure exchanges are able to make money based on facilitating trading instead of charging monopolistic markups to sell firms their own data back to them. Therefore, based on current market access fee structures, 10 mils does seem like the right cap at this moment in time. Id recommend accelerating implementation of the revised round lot definition, and the odd lot dissemination on the SIP, as contained in the Commissions Market Data Infrastructure Rule (MDIR). Two years ago, the majority of trades in the markets were odd lots (55% from https://bettermarkets.org/newsroom/key-highlights-dennis-kellehers-testimony-march-17-house-financial-services-gamestop-hearing/). Odd lots are now a majority of trades in the markets. Within some stocks, they are the vast majority. The exclusion of odd lots from the price of a stock amounts to the exclusion of most individual investors - most of the voting public. Please look into a way to fairly and proportionately include odd lots in the calculation of the NBBO. If the Commission were to remove odd lot information from this rule, my faith in the U.S. markets would become even more damaged than it already is I would support a structure that is clear and does not rely on vague language. For example, some funds and firms might request language like \"has a reasonable amount of liquidity at the NBBO\". Loose language makes enforcement difficult or impossible, and wastes taxpayer dollars on needless litigation time. Investors want to see results, not endless and wildly expensive slap-fights with Wall St. lawyers. Clear language and a clear and unambiguous tick size rule structure are strongly preferred. Please do not include vague language in the application of your rules. I think its imperative that the Commission take these steps in order to start gaining back confidence and trust from the public. Seeing what happened with Gamestop eroded Investor Confidence so much that Investors have been taking their shares out of the system to hold them with a Transfer Agent. And due to the recent trouble in regional banks, the greater public is increasingly realizing the very serious and threatening difference between owning an asset and owning the right to an asset. Every rule the SEC passes is only as good as the enforcement that backs it. Overall, I want to see higher fines that actually serve as a deterrent. I think some broker-dealers should lose their licenses instead of receiving fines that amount to nothing more than a cost of doing business - a cost that is often outweighed by the ill-gotten gains obtained through honest mistakes. Restoring - and protecting - faith in the U.S. markets is more critical than ever.