Mar. 19, 2023
Re: File No. S7-32-22; Release No. 34-96496· Regulation Best Execution Dear Ms. Countryman, As an individual retail investor, I thank you for the effort to create more competition and transparency in the market, and I appreciate the opportunity to comment on these proposals. In aggregate, these recommended enhancements constitute one of the most significant changes to U.S. equity market structure since Regulation NMS was implemented in 2005. This is a very encouraging step forward. I would hate to see these rules watered down with exceptions, excessively narrow re-definition, and loose language. Best Execution S7-32-22 FINRA has a best execution rule, but the SEC needs its own rule in order to enforce it. I support the Best Execution rule, but I don’t see how “conflicted orders” belong in a Best Execution rule. If payment for order flow continues, these “conflicted” brokers will continue to send our orders anywhere that gets them the most profit. TD Ameritrade (which was recently acquired by Schwab) states on their website: “We believe that competition among market centers for our order flow serves to improve execution quality. We monitor order executions daily, monthly, and quarterly, and seek market centers that will provide quality executions for our clients on a consistently reliable basis.” Looking at their most recent 606 report, it’s hard to believe competition is the motivation for their order routing decisions. In September 2022, there were dozens of registered exchanges and 69 registered Alternative Trading Systems. Despite the various routing opportunities, TD Ameritrade sent their equity orders to the same 3 venues for all of Q3 2022, with 80% going to just 2 firms: Citadel and Virtu. They each got around 40% of the orders, and the remaining went to Two Sigma Securities. They pay to get the first look at these orders, and to be able to trade against them or send them for execution where they choose, netting themselves billions of dollars in the process. If you look at Virtu’s financial reports, they made $5.2 million A DAY in Total Adjusted Net Trading Income in 3Q 2022. Clearly this is a very lucrative arrangement for them. Brokers who do not accept any kind of PFOF route orders differently and consequently, these brokers also see superior execution quality. Various firms have already commented opposing The Proposals offered by The Commission. Indeed, these proposals are a clear threat to their earnings per share and annual bonuses.