Mar. 19, 2023
Dear SEC, As an international investor, I believe that best execution is critical in trade execution, particularly for individual investors who may not fully understand the complexities involved in choosing how to execute a trade. It is crucial that the SEC provides clear guidance on how to read and interpret the data in Regulation NMS Rule 605 reports, especially for retail investors who may not have a deep understanding of the markets. As you know, brokers owe their customers a duty of Best Execution derived from common law agency principles and fiduciary obligations. However, I strongly believe that this principle needs to become a rule that the SEC can enforce. Conflicted orders do not belong in a Best Execution rule, and without it, customers may not be aware of revenue arrangements between brokers and subpar trading firms or that they may be paying higher transaction prices. I have noticed that different trading venues may offer different prices, slower execution can lead to missed opportunities, and information leaks can inhibit a successful transaction. Less reliable settlement processes can also delay the receipt of proceeds. In light of these challenges, I believe that quarterly reviews of execution quality would provide transparency and accountability for the broker-dealers' practices. I am aware that in December 2020, Robinhood was charged by the SEC with failure to satisfy its best execution obligation, resulting in an aggregate loss of $34.1 million for its customers. Similarly, Citadel paid the SEC $22.6 million in 2017 to settle best execution charges for executing customer trades at less favorable pricing when a better price was available. Brokers recommending mutual funds with 12b-1 fees and revenue-sharing arrangements with clearing brokers have also faced best execution charges from the SEC. I believe that the proposed Regulation Best Execution is a necessary step in protecting household investors and promoting fair and efficient markets by ensuring that household investors are receiving the best possible execution for their trades. The proposed rule would provide a more detailed and comprehensive standard for broker-dealers to follow, resulting in consistently robust best execution practices. Thank you for your attention to this matter. Sincerely, Ulises