Mar. 31, 2023
Dear Sir/Madam, I fully support the proposed rule to reduce the speed games that harm the markets' integrity, credibility, and functioning. The new rule requiring Citadel to go through a public auction for orders, instead of being first, is to give everyone an equal opportunity to fill the order, including pension funds. Payment for Order Flow (PFOF) should be banned in the US market, similar to the UK, due to conflict-of-interest concerns. Brokers who refuse PFOF have different order routing methods, resulting in better execution quality. A recent study found that Robinhood's revenue, mostly from PFOF, does not improve prices compared to exchanges. Retail investors who do not deal with PFOF get better prices than those who do, violating FINRA's Best Execution guidance. FINRA should make their findings public. TD Ameritrade does not seem to be motivated by competition, paying to get the first look at orders and routing them to firms that benefit them the most. To increase transparency in dark markets, Alternative Trading Systems should provide quotes and trades to consolidated market data. The Commission should ensure fair competition by having brokers route orders to an auction first, and if unsuccessful, specify where the order should go. The current state of American markets is anti-competitive, and fair competition is crucial, especially in off-exchange systems. Wholesalers have conflicts of interest, influencing other market participants and lying about their services to maintain profits. Removing middlemen from the market will benefit both individuals and institutions, such as pension funds, saving billions of dollars. The Commission should ensure fair competition by reducing monopolistic behavior and removing profiteering middlemen from the market. The proposed rule to increase transparency in dark markets should be implemented as soon as possible. The SEC should investigate conflicts of interest among market participants to ensure objective review of the rules. Enforcement of SEC rules needs to be improved with higher fines to serve as a significant deterrent. Some broker-dealers should lose their licenses instead of receiving fines that amount to a cost of doing business. Efforts to reduce inducements and 'farming' of individuals' orders for rebate money are also appreciated. The current system, where a broker sends orders to a wholesaler that passes them to the auction and back to the wholesaler, is unnecessarily complex and grants the wholesaler an unfair information advantage. Brokers should send orders directly to the auction to ensure equal knowledge. Transparency in dark markets is necessary, and the rule changes requiring them to provide quotes and trades to consolidated market data is a positive change. Fair competition is important, and the SEC must ensure it among brokers, dealers, and exchange markets. The current market structure is anti-competitive and monopolistic, and the proposed rule is a step towards a more fair and transparent market. Wholesalers with a history of flouting the law, such as Citadel Securities, should be avoided, even if it means paying more per share or commission. The conflicts of interest between wholesalers and broker-dealers can lead to undue influence and harm market participants' ability to objectively review rules. Kindly yours, Konstantin Kobanenko