Mar. 31, 2023
File No. S7-31-22; Release No. 34-96495: Order Competition Rule Dear Ms. Countryman: The proposed rule to increase transparency and competition in the market for NMS stocks is an important step in the right direction towards fairer markets. It is not just overdue, but unconscionable that it is only just now coming to light as a consideration. The rule's support for public auctions that give all participants an equal opportunity to fill orders, rather than just giving the first right to Citadel (or in the event that some other entity were to take the place of Citadel), is especially commendable. Payment for Order Flow (PFOF) has long been a controversial issue, and the proposed ban on PFOF is a necessary measure to address conflicts of interest concerns. The study's finding that Robinhood does not provide statistically significant price improvement despite PFOF being responsible for around 70% of its revenue is alarming, and reinforces the need to ban this practice. The proposed rule's focus on ensuring that broker routing decisions are motivated by competition is a welcome move. Brokers who do not accept any kind of PFOF should not be at a disadvantage, and should be able to route orders differently and see superior execution quality. The need to evaluate the impact of not charging commissions on member firms' order-routing practices and decisions is an important consideration, and the findings of this evaluation should be made public. The proposal to bring more transparency to dark markets by requiring dark pools to provide quotes and trades to consolidated market data is also a much-needed measure. Wholesalers exercise extreme influence on other market participants, and the conflicts of interest that arise from their profiteering need to be addressed. Removing middlemen from the market will improve prices for both individuals and institutions, and save billions of dollars taken by wholesalers. Overall, the proposed rule is a positive step towards ensuring fair competition and transparency in the market for NMS stocks. The SEC should investigate conflicts of interest among market participants to ensure that the rules are objectively reviewed, and enforcement of SEC rules needs to be improved with higher fines to serve as a significant deterrent for breaking the law. The Commission should also consider revoking licenses of broker-dealers who repeatedly break the rules, rather than just fining them. Investors should have access to the best priced quotations available in the national market system and such prices generally should be determined by competitive market forces, that is to say, the law of supply and demand should be allowed to operate as expected. It shouldn’t be possible to pay billions of dollars for retail orders for the ability to control everything in that entire market. Citadel recommended withdrawing this proposal for a number of reasons, including the unprecedented nature of requiring certain market participants to utilize a specific trading protocol. Sending my orders to a wholesaler to be internalized is a specific trading protocol that I’d rather pay commission to be able to avoid. A wholesaler such as Citadel who has been front-running customer orders since 2006 shouldn’t have a monopoly on retail order flow. My only concern is that brokers will start charging outrageous commissions or fees in lieu of PFOF, so I’d recommend a cap on the amount of commissions or fees that the brokers are allowed to charge. I trust the Economic Analysis done by the commission and I look forward to retail saving from $1.12 billion to $2.35 billion on transaction costs. These estimated gains would be generated primarily through increased competition to supply liquidity to marketable orders of individual investors, which in turn would lower transaction costs for individual investors, potentially enhance order execution quality for institutional investors, and improve price discovery. Sent with Proton Mail secure email.