Mar. 31, 2023
I would like to express my gratitude for your efforts to increase competition and transparency in the US equity market. I am grateful for the opportunity to comment on the proposed changes. I would like to draw your attention to the Best Execution rule (S7-32-22). Although brokers generally act as agents for their clients, they owe them a duty of Best Execution, which derives from common law agency principles and fiduciary obligations. I support the Best Execution rule, but I am concerned about the inclusion of "conflicted orders" in the rule. If payment for order flow continues, "conflicted" brokers will continue to send orders to wherever they can make the most profit. I believe that payment for order flow has been effectively banned in the United Kingdom due to conflict-of-interest concerns, and I would like to see the same policy implemented in the US. I am also concerned about the lack of compliance with the disclosure of order information (S7-29-22). While brokers are required to file 606 reports quarterly, the risk alerts from FINRA and the SEC have highlighted issues with inaccurate information and incomplete disclosures. I fear that brokers may be non-compliant with the new 605 reports, which would provide little or no benefit to retail investors. Regarding the Order Competition Rule (S7-31-22), I believe that investors should have access to the best-priced quotations available in the national market system, and such prices should generally be determined by competitive market forces. I support the proposal to withdraw the ability to pay billions of dollars for retail orders for the ability to control everything in that entire market. However, my concern is that brokers will start charging outrageous commissions or fees in lieu of PFOF. Therefore, I recommend capping the amount of commissions or fees that brokers are allowed to charge. Finally, I support the proposal to establish a variable minimum pricing increment model that would apply to both the quoting and trading of NMS stocks in Tick Sizes, Access Fees, and Transparency of Better Priced Orders (S7-30-22). I believe that rebates and other inducements in the marketplace are simply payment for order flow by another name, and they lead to trading for the sake of volume. Thank you for considering my comments. Andrew Buck