Mar. 27, 2023
Vanessa Countryman, Secretary, U.S. Securities and Exchange Commission, 100 F Street, N.E, Washington, D.C. 20549 File No. S7-32-22; Release No. 34-96496· Regulation Best Execution Dear Ms. Countryman: The proposed rule is a critical step in protecting individual investors and promoting fair and efficient markets. Best execution is important in trade execution, especially for individual investors who may not fully understand the complexities involved in choosing how to execute a trade. Brokers owe their customers a duty of best execution derived from common law agency principles and fiduciary obligations. However, this duty needs to become a rule that the SEC can enforce to ensure transparency and accountability for broker-dealers' practices. Conflicted orders do not belong in a best execution rule, as such orders can negatively impact execution quality and prevent individual investors from receiving the best possible execution for their trades. Without the proposed 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, and slower execution can lead to missed opportunities. Information leaks can inhibit a successful transaction, and less reliable settlement processes can delay receipt of proceeds. It is essential to provide 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. Quarterly reviews of execution quality would provide transparency and accountability for broker-dealers' practices, which would protect individual investors. The SEC charged Robinhood in December 2020 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. 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. Sincerely, Adam Simpson