Sep. 22, 2026
9/22/26 Vanessa A. Countryman Secretary U.S. Securities and Exchange Commission 100 F Street, NE Washington, DC 20549-1090 By email: rule-comments@sec.gov Re: File Number S7-2026-20 (proposed rescission of Regulation NMS Rules 611 and 610(e)); and request that the Commission consider a fee on short-life unfilled displayed size Dear Ms. Countryman: I am a retail trader. In this letter, "retail" includes mutual funds and other participants who do not have dedicated high-speed links to the exchanges. I write about fake displayed demand, not about banning high-frequency trading and not about latency arbitrage. The problem When I look at a stock I watch size and volume to judge demand. Large displayed size looks like someone wants the stock at that price. I and other slower traders chase that print. Often that size was never real. A fast firm posts thousands to millions of shares-sometimes all-or-none-long enough for the tape and for slower screens to show demand. Price ticks. Retail and fund orders follow. Before that large order trades, it is canceled. The firm then trades the other side, or the side it actually wanted, at the better price the fake size just created. The market reads a drop in demand and the move reverses. I pay more, miss a fill, or am pulled into a trade that is already turning. The profit on each event can be a fraction of a cent. Across the tape it adds up. I cannot see the cancel in time and I cannot avoid it. This is not latency arbitrage. Latency arbitrage is hitting a stale real quote because one feed is faster than another. That is a market-data problem. This is fake demand: size shown in order to move the print and then yanked. Spoofing law is not enough That pattern is already unlawful when the firm never intended to trade the displayed size. On futures, Commodity Exchange Act section 4c(a)(5)(C), added by Dodd-Frank section 747, prohibits bidding or offering with the intent to cancel before execution. CFTC guidance treats layering and false depth as part of that conduct. Intent must be proved. Recklessness is not enough. On listed stocks and options there is no statute that uses the word "spoofing." The Commission uses Exchange Act section 10(b) and Rule 10b-5, Exchange Act section 9, and related fraud provisions. Intent and deception still have to be proved. The Commission still brings those cases. Most of the pattern never becomes a case. A new conduct rule would be more of the same. Enforcement is after the fact. Retail has already chased the print. What I ask the Commission to consider Price the tool that makes fake demand cheap: unfilled displayed size that dies fast. Charge the dead order. Do not net that cancel against a later fill on the other side. Do not exempt anyone by the label "market maker." Leave standing quotes that actually trade alone. A workable design with few knobs: 1. Apply the fee at the order level, not as a daily net for the firm or MPID. 2. Apply it to shares or option contracts canceled within a short time after entry with little or no fill. A window measured in hundreds of milliseconds would reach flicker and decoy size and miss ordinary working of an order. 3. Example rates: one cent per share on NMS stock; one cent per contract on listed options. 4. A later fill on the opposite side does not wash out the fee on the decoy order. 5. Registration as a market maker is irrelevant. If the quote trades, that order is not the problem. If large size appears, fills nothing, and vanishes in microseconds, that order is the problem. The Commission already assesses transaction fees on executions. It can assess a fee on this class of cancels. Traders who rarely cancel short-life unfilled size would pay little or nothing. Why a firm-wide cancel-to-fill ratio is the wrong sole test If the Commission only looks at a day's cancels divided by a day's fills, a firm can cancel 100,000 unfilled decoy shares and later fill 100,000 shares the other way and look like 1:1. Count the dead order. Count by side. Do not net the decoy against the real trade. Relation to File S7-2026-20 I take no position here on whether Rules 611 and 610(e) should be rescinded. Protected quotations and flicker quotes are part of the same picture: displayed size that is gone before a slower order can reach it. Rescinding Rule 611 would not, by itself, make fake demand expensive. A fee on short-life unfilled size would. What I am not asking I am not asking the Commission to ban high-frequency trading. I am not asking the Commission to treat this fee as a fix for latency arbitrage or for SIP-versus-proprietary-feed speed. I am not asking for an exemption list by business model. I am asking the Commission to make unfilled size that is shown only long enough to move the print, cost something. I would be glad to provide a longer working draft if staff in the Division of Trading and Markets want it. Respectfully submitted, Patrick Lalande Quincy, IL Retail trader / individual investor