Mar. 23, 2023
March 23, 2023 In regards to File No. S7-32-22 Release No. 34-96496 Regulation Best Execution. Overall, I, as a household investor with a family, support this proposal and feel it should be implemented as soon as possible. That being said, every rule the SEC passes is only as good as the enforcement that backs it. Without active enforcement and severe and meaningful punishments for violations it won't matter what rules are implemented 'on paper'. Brokers generally act as agents for their customers and, although not specifically defined, owe them a duty of Best Execution, which is derived from common law agency principles and fiduciary obligations. FINRA has a best execution rule, but its about time it becomes a rule that the SEC can enforce. I support the Best Execution rule, but I dont 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. PFOF has been effectively banned in the United Kingdom due to conflict-of-interest concerns, and Id like to see the same policy implemented here. They didnt explicitly ban PFOF, rather, they issued guidance that said PFOF is a conflict of interest. After some market makers created their own definitions of PFOF arrangements they reminded them that PFOF is not consistent with best execution. FINRA launched a targeted exam to evaluate the impact that not charging commissions has or will have on the member firms order-routing practices and decisions, and other aspects of member firms business. FINRA stated they will share their findings with member firms at a future date. Id like this information to be made public as soon as its available. Some general things I feel are important... 1. The SEC should reduce conflicts of interest by increasing transparency in the routing of orders by brokers and wholesalers, with investors having access to the best priced quotations available in the NMS. 2. ATS (Alternative Trading Systems (ATS are SEC-regulated electronic trading platforms that match buyers and sellers of stocks) should submit detailed disclosures about their operations, including how they manage conflicts of interest, how they operate their order routing practices, and how they handle customer orders. This would make it easier for investors to understand how ATS operate and how their orders are executed. Transparency and information provided to investors to allow them to make properly informed decisions is always important. 3. The proposed changes to ATS rules promote better alignment with regulatory frameworks for exchanges would be beneficial for individual household investors. 4. ATS should establish and enforce written policies and procedures to prevent fraudulent and manipulative practices. This would help to protect individual investors from abusive practices in the ATS market. 5. ATS should provide detailed information about the operation of their systems to the SEC, including data on the execution of orders, order routing practices, and information about the use of dark pools. This would improve the SEC's ability to oversee ATS and ensure compliance with regulatory requirements. Although, its most important that the SEC actually ENFORCES compliance with regulatory requirements. Rules are useless if they are never enforced or if they were easily bypassed with loopholes and exemptions. 6. ATS should operate in a manner that is consistent with the broader regulatory structure of the securities markets, which would benefit individual investors by promoting fair and transparent trading practices. Transparency is keep. If data is hidden from investors then it is useless in allowing them to make informed decisions. 7. ATS implement a variable minimum pricing increment model for both quoting and trading of NMS stocks which would further promote fair and transparent pricing across trading venues, ultimately benefiting investors. 8. The proposal to implement a variable minimum pricing increment model for both quoting and trading of NMS stocks would promote fair pricing across trading venues, which is essential for ensuring a level playing field for all investors. 9. Household investors support any initiatives aimed at identifying and preventing fraudulent practices that undermine the credibility, integrity, and functionality of American markets. Of course as stated previously, ENFORCEMENT is most important aspect of ensuring the prevention of fraudulent activities, crime, and manipulation. If I only got a finger wag and a slap on the wrist for robbing a bank while never having to face actual punishment or even admit to guilt. Hell, my career would be robbing banks. I'd probably even just rob the same ones on a regular schedule. Kind of like how the big players in the markets rob household investors like clockwork. 10. Sending orders to a wholesaler for internalization should not be the only option available to investors. 11. Brokers may charge high commissions or fees in lieu of PFOF, so a cap should be implemented. 12. Estimated savings for retail investors range from $1.12 billion to $2.35 billion, primarily through increased competition to supply liquidity to marketable orders. 13. Competition in the marketplace is necessary to regulate markets better and barriers to competition, such as the conflicted nature of PFOF, should be removed. 14. The SEC should prioritize creating a competitive market structure that benefits investors and encourages transparency. This combined with actual ENFORCEMENT and meaningful punishments for violators is the only way to restore faith in our faltering markets. Additionally, while not directly related to this proposal I would also like to state that I heavily wish to see action taken against FTDs (failure-to-delivers) that occur. I also wish to see actual justice in the markets, by which I mean closing of loopholes, as well as strong actions taken against fraud, abuse, and manipulation. By strong actions, I mean more than just insignificant 'cost of doing business' level fines and no need to admit guilt. I mean ACTUAL consequences. The kind of consequences that poor Americans face when they commit crimes There needs to be actual enforcement and punishments that involve fines greater than the amounts profited from the crime. There needs to be severe consequences like prison time for the executives and CEOs that allow this, repayment to any and all affected parties / investors of an amount significantly greater than their losses. Those who commit crimes need to lose their ability to participate in the markets. Firms and institutions that regularly commit crimes need to be REMOVED PERMANENTLY from participation in the markets. Any regulators, politicians, or other cronies that were complicit in allowing these kinds of crimes to occur, such as those who aided in installing loopholes, exemptions, etc, also need to face fines, prison, and permanent removal from their positions and be banned from any other government positions in the future. The above may seem harsh, but I fully feel it to be necessary. Poor Americans are punished in these ways. If I were to speed on the highway regularly I would face heavy fines, increased insurance costs, court hearings, jail time, temporary revoking of my driving privileges, and ultimately the permanent loss of my legal permission to drive a vehicle for personal or business purposes. Our markets are extremely important to the health of our economy and our country as a whole. It would be no lie to say that market fraud is a serious risk to our national security and is immensely detrimental to the citizens whether they are active participants in the markets (such as in the form of household investors) or whether they are passive participants who are unknowingly victims of the crimes committed in our markets simply by working and having a 401k or pension. As a further side note, any regulators or agencies that allow for such crimes to occur in our markets should be ashamed of themselves. Not simply due to their failure to honorably perform their job with the noble goal of protecting the citizens of this country, but for their failure to be worthwhile human beings in general. I think its imperative that the Commission take these steps in order to start gaining back confidence and trust from the public Sincerely, Derek Lee A household investor and typical American wage slave