From: Suzanne Shatto
Sent: January 24, 2017
To: rule-comments@sec.gov
Subject: rule comments: Release No. 34-78309; File No. S7-14-16 RIN 3235-AL67 Disclosure of Order Handling Information

17 CFR Parts 240 and 242 Release No. 34-78309; File No. S7-14-16 RIN 3235-AL67 Disclosure of Order Handling Information

i was very pleased to see that several notre dame students have submitted comments on this rule. i agree with several of the commenters.

if a broker sells their order flow, then the broker needs to disclose this to the customer AND get the customer's permission.  the broker does not own the customer's order flow. instead, the broker is dependent on the customer's $ and portfolio - the broker provides care and custody of the customer's order and portfolio.  

there should be metrics that are public so that the brokers' customers can see where the broker's order flow is going and what the success rate is.  i would suppose that some of the fastest sellers to buy orders may be giving IOUs:  one of the metrics might be whether the trades closed on T+3 or T+4 or did not close by those trade dates.  further, customers should be able to choose where their order is executed.  i cannot now designate the exchange where my order is executed because my broker sells the order flow and does not consider my wishes in the matter.  my broker is dependent on when i put $ into my account in order to buy something. please tell me exactly where my broker takes title to my portfolio.

i would like to know what my broker receives in order to execute my orders.  if this is cents on the dollar, why is this more important in controlling my order, when i pay dollars to execute my orders. clearly, there is some conflict of interest here.

no one should be able to gain information from any trade. once the trade is made at the exchange, it moves to the clearinghouse.  it should not move to one of the parties in order to advantage them in the market.

i think brokers should disclose, upon request, the rebates and/or payments received for fulfilling the customer's order. i think retail and institutional customers are entitled to this information.

customers should be able to designate how their orders are executed, including WHERE their orders are executed.  instead of an opt-out to broker internalization, i think the brokers should be required to get their customer's permission for standard/forced routing.

best practices committees have to work. their allowed exchanges should be published.  if any exchanges are disallowed, the customer should be able to find out why that exchange has been banned from order flow execution.

i think brokers should provide time/date stamps to the orders so that the customer knows exactly to the microsecond when the trade was executed. further, when the regulators visit a broker or internalizer, they should check that all buy orders were not deemed to be executed at the same microsecond that happens to be the highest or lowest point.

i would like to know broker best practices about settlement also.  do they accept IOUs or counterfeit stock.  i would like to know T+3 and T+4 closing statistics.  i want to know if there are private contracts/IOUs that might affect my portfolio and i should consent to any of these. i want to know if i own my portfolio and if my broker has protected my portfolio and if my broker's audit shows that my portfolio was protected the entire quarter/year.

i think some financial entities have adopted bad business models in that their services are not necessary to the institutional/retail customer.  the SEC does not have to preserve any niche that currently exists.  some regulations may cause financial entities to change their business model and this is ok.  it would be in the public interest.

‚Äčthere should be no trade information leakage to market participants.  certainly, only the customer should be able to give that permission, since they own  the information.  neither brokers nor exchanges should be able to arbitrarily disclose information to third-parties.  but academic interest should be allowed access to trade information. this would help the regulators evaluate current systems and possible future enhancements, and maybe save the regulators' $. marketmakers have significant advantage just being able to be on the bid and ask.  i am still not convinced that markets need marketmakers, especially if they step aside or increase the downtrend during market stress.

i note that financial entities seek to delay dissemination of information in order to exploit information. regulators should curb this inside information advantage by requiring brokers to disclose information in a timely fashion.  why shouldn't the customer be able to get a trade report the same day as it was executed, the same day it was settled.  the brokers have the information.

retail customers should be able to get the same information as institutional customers.  i would defer to institutional customers about their needs, but the regulations should allow retail to get the same access.

one of the difficulties of changing brokers is that most brokers do the same thing.  there are few real choices. this industry is an oligopoly with few sellers and many buyers. if you are angry with your broker, there is little you can do about it.  transition is difficult.  my broker charges $600/equity to produce physical stock certificates, in order to have them sent to me.  i think this is an excessive amount to pay.

 

 

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sincerely, 

Suzanne Hamlet Shatto