Mar. 19, 2023
The SEC could enhance transparency in the routing of orders by brokers and wholesalers, providing investors with access to the most favorable quoted prices available in the NMS, thereby decreasing conflicts of interest. Proposed changes to ATS rules that align with regulatory frameworks for exchanges would be advantageous for household investors. To increase investor understanding of ATS operations, the SEC should require ATS to submit in-depth disclosures that explain how conflicts of interest are managed, how order routing practices work, and how customer orders are handled. This would help protect investors from abusive practices in the ATS market. To prevent fraudulent practices, ATS should establish and enforce written policies and procedures. ATS should also provide detailed information to the SEC about their systems' operation, including data on order execution, order routing practices, and the use of dark pools. To promote fair and transparent trading practices that benefit individual investors, ATS should operate in accordance with the broader regulatory structure of the securities markets. Additionally, a variable minimum pricing increment model for quoting and trading NMS stocks would promote fair pricing across trading venues, ultimately benefiting investors. It is crucial to identify and prevent fraudulent practices that undermine the credibility, integrity, and functionality of American markets. Investors should not be limited to sending orders to wholesalers for internalization, and brokers who charge high commissions or fees should be subject to a cap. Increased competition in the marketplace would lead to improved market regulation. Barriers to competition, such as the conflicted nature of PFOF, should be removed. According to estimates, household investors could save between $1.12 billion and $2.35 billion through increased competition to supply liquidity to marketable orders. The SEC must prioritize creating a market structure that is competitive, benefits investors, and encourages transparency.