Mar. 26, 2023
March 26th, 2023 By Email Vanessa A. Countryman Secretary U.S. Securities and Exchange Commission 100 F Street, N.E. Washington, D.C. 205499–1090 rule-comments@sec.gov Dear Ms. Countryman, The SEC's proposed rule File No. S7-29-22; Release No. 34-96493, titled Disclosure of Order Execution Information, is an essential step in protecting individual investors and promoting fair and efficient markets. Best execution is a critical aspect of trade execution, especially for individual investors who may not fully understand the complexities involved in choosing how to execute a trade. The proposed rule would provide clear guidance on how to read and interpret Regulation NMS Rule 605 reports, especially for retail investors who may not have a deep understanding of the markets. Brokers owe their customers a duty of best execution derived from common law agency principles and fiduciary obligations. However, it needs to become a rule that the SEC can enforce. Conflicted orders do not belong in a best execution rule. Without the best execution rule, customers may not be aware of revenue arrangements between brokers and subpar trading firms or that they may be paying higher transaction prices. Different trading venues may offer different prices, slower execution can lead to missed opportunities, and information leaks can inhibit a successful transaction, and less reliable settlement processes can delay receipt of proceeds. It is essential to provide transparency and accountability for the broker-dealers' practices, and quarterly reviews of execution quality would serve this purpose. The proposed rule would provide a more detailed and comprehensive standard for broker-dealers to follow, resulting in consistently robust best execution practices. This is necessary because, in recent years, several brokers have faced best execution charges from the SEC. For instance, 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. Robinhood made misleading statements and did not disclose payments received for routing trades to specific firms. Similarly, Citadel paid the SEC $22.6 million in 2017 to settle best execution charges for executing customer trades at less favourable 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. Thus, 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. In conclusion, the SEC's proposed rule File No. S7-29-22; Release No. 34-96493, titled Disclosure of Order Execution Information, is crucial in protecting individual investors and promoting fair and efficient markets. The proposed rule provides clear guidance, accountability, and transparency for broker-dealers' practices, ensuring that customers receive the best possible execution for their trades. The SEC should enforce this rule to prevent unethical behaviour and prevent brokers from taking advantage of the market. Sincerely, Grant Carroll