Mar. 31, 2023
Dear SEC Commissioners, I am writing to express my concern about the lack of transparency and fairness in the Alternative Trading System (ATS) market, which has led to conflicts of interest and abusive practices that harm individual investors. As a concerned household investor, I urge the SEC to take action to promote greater transparency and fairness in the operation of ATS. Here are some key facts that support my position: ATS are SEC-regulated electronic trading platforms that match buyers and sellers of stocks. They account for a significant share of trading volume in the U.S. stock market, with some estimates suggesting that ATS account for up to 40% of all trading activity. ATS operate in a largely opaque and unregulated market, with little transparency about their operations, order routing practices, and conflicts of interest. Some ATS, known as dark pools, offer hidden liquidity to market participants, which can create an unfair advantage for large institutional investors and hurt individual investors who do not have access to these venues. ATS are not subject to the same regulatory requirements as exchanges, which can create a regulatory gap that allows abusive practices to occur. For example, ATS are not required to provide the same level of disclosure about their operations as exchanges, nor are they subject to the same best execution and fair access requirements. Recent studies have shown that ATS can pose a risk to market integrity, with evidence of manipulative trading practices and conflicts of interest in some ATS. The SEC has proposed changes to ATS rules that would promote better alignment with regulatory frameworks for exchanges, including greater transparency and disclosure requirements. These changes would be beneficial for individual household investors, who rely on fair and transparent markets to make informed investment decisions. Based on these facts, I urge the SEC to take the following steps to promote transparency and fairness in the ATS market: Require ATS to submit detailed disclosures about their operations, including how they manage conflicts of interest, how they operate their order routing practices, and how they handle customer orders. This would make it easier for investors to understand how ATS operate and how their orders are executed. Establish and enforce written policies and procedures to prevent fraudulent and manipulative practices in the ATS market. This would help to protect individual investors from abusive practices in the ATS market. Require ATS to provide detailed information about the operation of their systems, including data on the execution of orders, order routing practices, and information about the use of dark pools. This would improve the SEC's ability to oversee ATS and ensure compliance with regulatory requirements. In conclusion, I believe that the SEC has a responsibility to promote transparency and fairness in the ATS market. By taking the steps outlined above, the SEC can help to reduce conflicts of interest and promote greater transparency and fairness in the operation of ATS. I urge the SEC to prioritize these principles in its rulemaking and oversight of the ATS market. Thank you for your attention to this important matter. Sincerely, Household Invester.