Mar. 19, 2023
Good day, I am writing today regarding File No. S7-29-22 and Release No. 34-96493. Best execution is important in trade execution for individual investors who may not understand the complexities involved in choosing how to execute a trade. I would like to see clear guidance on how to read and interpret the data in Regulation NMS Rule 605 reports, especially for retail investors who may not have a deep understanding of the markets. Brokers owe their customers a duty of Best Execution derived from common law agency principles and fiduciary obligations, but it needs to become a rule that the SEC can enforce. Conflicted orders don't belong in a Best Execution rule. Without the best execution rule, customers may not be aware of revenue arrangements between brokers and subpar trading firms or that they may be paying higher transaction prices. Different trading venues may offer different prices, slower execution can lead to missed opportunities. Information leaks can inhibit a successful transaction, and less reliable settlement processes can delay receipt of proceeds. In December 2020, Robinhood was charged by the SEC with failure to satisfy its best execution obligation, resulting in an aggregate loss of $34.1 million for its customers. Robinhood made misleading statements and did not disclose payments received for routing trades to specific firms. Citadel paid the SEC $22.6 million in 2017 to settle best execution charges for executing customer trades at less favorable pricing when a better price was available. Brokers recommending mutual funds with 12b-1 fees and revenue sharing arrangements with clearing brokers have also faced best execution charges from the SEC. Quarterly reviews of execution quality would provide transparency and accountability for the broker-dealers' practices. The proposed rule would provide a more detailed and comprehensive standard for broker-dealers to follow, resulting in consistently robust best execution practices. The proposed Regulation Best Execution is a necessary step in protecting household investors and promoting fair and efficient markets by ensuring that household investors are receiving the best possible execution for their trades. That all being said, I support the new rules that aim to enforce legal requirements that should have already been in place and mandate more transparent disclosure of their practices to prevent deception. This will help to expose any unethical behavior and prevent them from taking advantage of the market. Once again, thank you for your time, Joseph Burgess