Mar. 31, 2023
As a retail investor, I support the rule(s) the SEC is attempting to put in place. To align our markets with the rest of the world’s major markets, PFOF should not be allowed. Retail is happy to pay a higher initial cost if it means backend institutions are not able to take the trades and ultimately use that data against us. These institutions claim they are providing best price execution for retail as evidence of its benefits, but such an explanation conveniently ignores what is taking place on the backend that essentially gives them more control over the end-price as they can sell/use that data to move the security in the direction of their choosing. The goal of investing is for investors to, all else being equal, see improvement in the security value over time, not to save a few dollars on trading costs. Corporate success and profits should be based on the merits of the corporations themselves and not on the shenanigans of Wall Street bros. For the up-tick portion, the same idea applies. Backend systems owned by companies or institutions that can game the system by trading on values less than a penny mean they can route/“win” trades by essentially underbidding by even the smallest amount what another institution cannot, thereby manipulating large groups of shares to again run the market and pick winners/losers. This is antithetical to free markets and gives them an unfair advantage and should be banned. Level the playing field, please. Regarding round lots and SIP, ensuring that all trades whether 1 share or 100 are handled the same is paramount to ensure retail orders are not gamed and sent off-exchange for what is essentially price dilution over time. It is clear that odd lots are the bulk of trades by retail and the current rules allow for institutional subterfuge over the rest of us. We have a massive amount of warehousing taking place where wholesalers can grab odd lots, warehouse them, and hold onto them indefinitely while allowing only sells to hit the market, causing price decline through no fault of a company that may otherwise be doing just fine. This sort of gaming of what would otherwise be true price discovery is antithetical to good and morally sound markets. If you want a legacy of actually improving the markets, implement the rules proposed. Institutional outrage towards these proposals is an indication that you’re moving in the correct direction, particularly when comments amount to “delay delay!” or “scrap it entirely!”. You can take such comments and dismiss them entirely as the distractions they are. That such commenters have set up their business models to exploit the current system is of no concern to retail. They made their beds, now they can lie in them. Thank you, Michael