Mar. 31, 2023
To whom it may concern at the SEC, I am a retail investor who has no other choice but to play by the rules that financial markets make available to me. However and for way too long, and to the detriment of retail/household investors, the big players of US financial markets (i.e. - Short Hedge Funds and Big Banks) have consistently not played by the rules. And when they are caught circumventing the rules, they are simply given a small fine in comparison to the HUGE profits they reap. For these organizations, it is simply a cost of doing business. This is wrong, unethical and completely against what the SEC says it wants/needs/promotes/advocates for US financial markets as it applies to ALL investors... especially for retail investors like me. That is why I fully support this proposed rule, I would appreciate it if the SEC could implement it as soon as possible. COMPETITION IS GOOD THROUGH "OPEN & FAIR" MARKETS AS IT INCREASES THE PUBLIC'S TRUST IN FINANCIAL ESTABLISHMENTS (GOVERNMENT & PRIVATE) AND CONTRIBUTES THE STABILITY OF THE OVERALL FINANCIAL SYSTEM. 15 U.S.C. 78k-1 (“section 11A”) states that "It is in the public interest and appropriate for the protection of investors and the maintenance of fair and orderly markets to assure ... fair competition among brokers and dealers, among exchange markets, and between exchange markets and markets other than exchange markets." For too long the Commission has not been enduring fair competition, especially within the off-exchange systems that currently dominate. It's good to see they are beginning to take their mandate more seriously. That said, below are many points which I find best describe the issues as they currently stand. It is my great hope you can act on these flagrant points, with this new rule, that are so obvious to many of us whereas these have already been brought up to the SEC on many other occasions. 1.- Monopolies are bad, and there is clear monopolistic behavior here. The Commission notes that 90% of marketable orders of individual investors in NMS stocks go to a small group of six off-exchange dealers, and 66% is captured by just two firms. Those figures will be even higher for specific stocks. The state of American markets is clearly anti-competitive and that needs to change. 2.- The current market is obviously not fair and this proposed rule is an important step in that direction. Fair competition is incredibly important and it’s good to see the SEC prioritizing true competition. 3.- There are clearly some market participants benefitting from a dominant, anti-competitive position in the marketplace. They pay for order flow or secure it through backroom deals. Why can't orders compete in lit markets? They should - and it's good to see that the Commission finally realizes this. 4.- Support for the new rule that states that Citadel cannot be the first to receive orders; instead, orders must go to a public auction where everyone, including pension funds, has an equal opportunity to fill the order. 5.- Payment for Order Flow (PFOF) has been effectively banned in the UK due to conflict-of-interest concerns – and this should be the case in US markets too. 6.- Brokers who do not accept any kind of PFOF route orders differently and consequently see superior execution quality. 7.- A recent study found that Robinhood does not provide statistically significant price improvement relative to exchanges, despite PFOF being responsible for around 70% of its revenue. 8.- Retail investors not dealing with PFOF get a better price than those dealing with it, violating FINRA's Best Execution guidance. 9.- FINRA is evaluating the impact of not charging commissions on member firms' order-routing practices and decisions, and the findings should be made public. 10.- TD Ameritrade's order routing decisions don't seem to be motivated by competition despite what they state on their website, and they pay to get the first look at orders, routing them to firms that net themselves billions of dollars in the process. 11.- Dark pools (Alternative Trading Systems) should provide quotes and trades to consolidated market data to bring more transparency to dark markets. 12.- The Commission should address the unfair information advantage of wholesalers by having brokers first route to the auction and specify where the order should go if the auction is unsuccessful. 13.- The state of American markets is anti-competitive, and fair competition is essential. The Commission needs to ensure fair competition, especially within the off-exchange systems that currently dominate. 14.- Wholesalers exercise extreme influence on other market participants, and there are conflicts of interest that may infect the ability of some participants to objectively review the rules. 15.- Wholesalers are taking billions from individuals and institutions and calling it "superior performance" while lying about the quality of their services to maintain their profits. Other incentives for the SEC to consider with the implementation of the new rule... 1.- Removing middlemen from the market will improve prices for both individuals and institutions, such as pension funds. The auctions would save individuals billions of dollars taken by wholesalers. 2.- Ensure fair competition by reducing monopolistic behaviour and removing profiteering middlemen from the market. 3.- Bring more transparency to dark markets should be implemented as soon as possible. 4.- SEC investigations into conflicts of interest among market participants to ensure that participants can objectively review the rules. 5.- The enforcement of SEC rules would be improved with higher fines to serve as a significant deterrent for those breaking the law. 6.- Some broker-dealers should lose their licenses instead of receiving fines that amount to a cost of doing business. Regards, Denis Niles Ottawa, Ontario, Canada