Mar. 30, 2023
To whom this may concern, The suggested regulation is a crucial measure to safeguard individual investors and encourage equitable and effective markets. The proper execution of trades is essential, particularly for individual investors who might not have a full grasp of the intricacies involved in selecting a trade execution method. Brokers have an obligation to provide their customers with the best execution possible, which is based on common law agency principles and fiduciary duties. However, this obligation must be elevated to a formal rule that the SEC can enforce to ensure that broker-dealers' practices are transparent and accountable. Including conflicted orders in a best execution rule is inappropriate since they have the potential to harm the quality of trade execution and hinder individual investors from receiving optimal trade execution. If the proposed rule is not implemented, customers may not be informed of any revenue sharing agreements between brokers and substandard trading firms, and as a result, they may end up paying higher transaction costs. Moreover, various trading venues may offer varying prices, and slower execution speeds could lead to missed opportunities. Leaked information can impede successful transactions, and settlement processes that are less reliable may delay the receipt of proceeds. Providing clear guidance on how to read and interpret the data in Regulation NMS Rule 605 reports is crucial, especially for retail investors who may not possess an in-depth comprehension of the markets. Conducting quarterly reviews of execution quality would promote transparency and accountability for broker-dealers' practices, thereby safeguarding individual investors. In December 2020, the SEC charged Robinhood with failing to fulfill its best execution responsibility, leading to a combined loss of $34.1 million for its customers. Robinhood made deceptive statements and failed to disclose payments received for routing trades to particular firms. Citadel, in 2017, paid the SEC $22.6 million to settle best execution charges for executing customer trades at less favorable pricing when a better price was available. Brokers who recommend mutual funds with 12b-1 fees and revenue-sharing arrangements with clearing brokers have also faced best execution charges from the SEC. Thank you for your time and consideration. -Daniel Abad