Mar. 12, 2023
I am all for passing the public auction rule. The current system allows market making firms too much power to ‘steer’ markets as they say, and especially single tickers that are heavily retail oriented. Market Making is an industry with high barriers to entry and little competition. They have increasingly dominated market orders over the last few years and used that lack of competition to assert their offering of the best prices. This is only true because they have orders sent straight to them and there is no competition on that price. This set up brings gigantic tail risks to the markets and creates entities that become too big to fail and monopolize our ‘free and fair’ markets into their own book making operation. When a select few companies dominate an entire market, especially one such as the American stock market which is the largest driver of wealth accumulation on the planet, any untoward dealings must be given leeway lest one of those companies fail and the entire system goes off the rails. This is clearly dangerous as the markets become very unfair and the risk of a failing entity becomes system collapse. Imagine providing execution for 1/3 of all retail orders and having the ability to see orders being placed and deciding whether you would like to execute them on the open market or to hold them internally (this is literally betting against the retail trader aka book making). Now look to hyped retail stocks- NVDA or TSLA currently- the firm can see seller or buyer exhaustion, take the opposite direction, push orders following their direction into the market while internalizing opposite direction orders for later execution. This is the ‘steering’ of markets and creation of non-existent momentum for pure profit at the expense of the public. A public auction disperses these forces entirely and provides and much fairer playing field for everybody interested in American markets. I understand the current setup provides a certain smoothness. But as I spoke about tail risks and too large to fail entities, it sets up a certain brittleness. Please pass the public auction rule and make our markets both safer and fairer.