May 23, 2016
Chair White, Commissioners, and Members of the Equity Market Structure Advisory Committee, thank you for the opportunity to comment on the Access Fee Pilot.
I am a retail investor. In general, I place resting limit orders on lit venues. Occasionally, I take liquidity at the quoted price. My experience is one of frustration when I see my order alone at the NBBO, with trades taking place at my price, but none of them filling my order. This sense of frustration is not mitigated when I decide to take liquidity and get an instant fill with a de minimus $.00001 price improvement.
When there were specialists, my resting order would be reflected in the order book just like now, only it had time/price priority, and if there was volume enough at my price, I would get the fill. No one could step in front of my order at that price. This seems fair, whatever else one criticizes about the specialist system.
The NMS Subcommittees recommendation to test various tiers of maker/taker pricing is a good start for a pilot, and I commend their efforts and their rationales. But since the Pilot is aimed at generating data, other ideas should be tested as well.
I encourage testing some kind of lit venue prioritization, maybe not Trade-At, but something that prioritizes the execution of lit quotes. The NMS subcommittee feels that there is already a Trade-At test in the Tick Test Pilot. Chair White asks if there is a way to run both the Tick Test Pilot and the Access Fee Pilot without interfering with each. Since the Trade-At bucket in the Tick Test Pilot only covers common stocks with market caps under $5 billion, while the Access Fee Pilot covers all stocks, perhaps one way to test access fees in combination with a Trade At or Lit Priority Preference would be to run it on common stocks with market caps over $5 billion.
Payment for order flow should also be testing during this Pilot. See what happens if the payment is disallowed or passed through to the customer.
Thank you again for the opportunity to address the Equity Market Structure Advisory Committee,
JA