Mar. 12, 2023
To whom this may concern, I appreciate and support any efforts to reduce the use of latency arbitrage which as a whole damages the integrity, credibility, and functioning of American markets. The global economy should be able to take part in a fair market that isn't held hostage by institutions like Virtu and Citadel. A broker routing an order first to a wholesaler, who then passes them to the auction, which might route it back to the wholesaler, seems unnecessarily complex and also grants the wholesaler a profound information advantage against other market participants: they get to see orders well before anyone else. The Commission should address this unfair information advantage by having brokers first route to the auction and specify where the order should go if the auction is unsuccessful. That way the entire market has equal knowledge. No one entity should have access to the information of an order being placed and the ability to skim pennies off the top before anyone else has a chance to compete. The current rule forces dark pools (Alternative Trading Systems) to provide quotes and trades to consolidated market data IF they wish to operate as an auction. I fully support and appreciate rule changes like this that bring more transparency to dark markets. The investing public should have easy access to what is happening within the markets. This would also increase the activity on the lit exchange where orders should be routed by default. As stated above the moment one or more entities are allowed to siphon market orders into their own private sector, that is the moment all transparency, rule of law, and fairness ends. Monopolies are bad, and there is clear monopolistic behavior here. The Commission notes that 90% of marketable orders of individual investors in NMS stocks to a small group of six off-exchange dealers, and 66% is captured by just two firms. The American market is clearly anti-competitive and that needs to change, not just for US and Canadian investors but overseas investors of the future as well. I personally and many other smaller investors would gladly pay more per share to avoid being routed through a wholesaler that has been charged over 70 times by the United States government (https://files.brokercheck.finra.org/firm/firm_116797.pdf). Research heavily suggests that internalization is bad for markets. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4070056. It is clear to me how removing the profiteering middlemen from the market will improve prices for both individuals and institutions (e.g. pension funds). Recent research by Hittal Mittesh suggests that on top of the Commission's estimate that the auctions would save individuals from billions of dollars taken by wholesalers, it would also save institutions over $1.5 billion each year. Wholesalers are taking from citizens AND people's pensions - that needs to stop. Citation: https://4982966.fs1.hubspotusercontent-na1.net/hubfs/4982966/BestEx%20Research%20Order%20Competition%20Rule%20Analysis%2020230105.pdf. I as an individual investor believe this rule should be put in place immediately and enforced to the fullest extent of the law. This rule will level the playing field between wholesalers, broker-dealers, and their clients. It will be no surprise to anyone that entities like Citadel Securities and Virtu to name a few will send an army of lawyers to try and stop this change from happening. This is a clear example of how those in the monopoly which is illegal will fight to keep their advantage in the stock market. It is clear by their comments sent to the SEC that they are not interested in fair and free markets where anyone can win or lose. They want to lawyer their way into victory on a daily basis at the cost of pension funds, retail investors, and institutions alike. These big firms do not care about the rule of law based on their actual actions within the stock market on a global scale. Some firms have been fined numerous times for breaking regulation that is enforced by the SEC, these fines are not a deterrent to Wall Street which are more than happy to pay these fines in order to stay open for business. A change such as this one will put a stop to their giant ponzi scheme that is latency arbitrage, front running, and naked shorting of the stock market at the expense of everyone else. If these big Wall Street firms are so good at trading on the US stock market then having an auction-style system where they have to compete with everyone would be no problem for them. They should be saying yes to your proposal and yes to a fair market structure, because it wouldn't impact their business at all if they were truely trading on the US stock exchange fairly.