Mar. 31, 2023
March 31, 2023 Dear SEC, Market Structure is clearly broken. What nobody is talking about in this discussion is the lack of liquidity that is in the marketplace. I do not understand how we took stocks like MSFT and AAPL with trillions in market cap that trade with so little lit size. I was under the impression that spoofing and layering is still illegal. What has evolved over time, 100 lot stub quotes have created so many non bonafide quotes that are canceling and replacing at all different prices to induce people to trade and affect huge amounts of price slippage. The reason liquidity has become so fickle is because no one puts out lit bids or offers anymore. If you have the inside market where the spread is ..01 x .30 and I offer out at .29 Payment for order flow internalization will take the order and rather than execute against my .29, the internalized order will give their customer price improvement at lets say .289 cents. Sounds great in theory but what if I put the order out at 27 cents. In this case the order will get executed at .269. Again, the order gets price improvement. If I offer at.25.. same scenario the order will get done at .249. Those that approve the new rules will say ... BUT we gave price improvement on every order. The problem is MY ORDER was disenfranchised and was not executed because payment for order flow created an inefficient market. It favored the incoming order over mine. So what has happened very few participants place lit orders making spreads WIDER AND WIDER and less liquid. This is why you see MSFT and AAPL trading like penny stocks. Spoofing and layering to move the market to internalize order flow has fleeced the retail customer far more than any commission can ever charge. Here is another scenario that I find appalling and down right criminal. I was trading a stock that had a spread after hours at 40.00 by 42.00. I am splitting my order in the lit market at 42.00 on the offer and hidden on multiple exchanges from 40.75 to 41.50. Someone got executed at 42.00 on an internalized order in the third market at 41.999. This order was for 5000 shares and he paid the ABSOLUTE TOP PRICE since that was the lit market. I CONTINUE TO STRESS that market participants will not put out orders at competitive prices because they know payment for order flow will steal their trade So in this example this order could have been done UNDER 41 dollars and the order would have saved OVER 5k.. but instead, they got free tickets and saved 9.95 in commission. I ask ... who is this benefitting from this? Not the liquidity provider because he is traded against almost every time. Not the incoming order... because it was sent to a destination that benefitted the payment for order flow provider. This scenario alone should BAN payment for order flow, as this order got THE WORST execution possible. IF you fail to act on payment for order flow the market will continue to break even more and will make it so that when the next crisis hits.. the real liquidity will become more fickle and more fraudulent as spoofing and layering has become the norm. Sincerely, A VERY CONCERNED AND DISENFRANCHISED MARKET PARTICIPANT