Mar. 23, 2023
I am writing in support of the SEC's proposed rule, No. S7-29-22; Release No. 34-96493, which would require brokers to disclose information on their order execution practices. This rule is critical to ensure that investors receive the best possible execution of their orders. The proposed rule will prevent brokers from engaging in conflicted orders, which have no place in a best execution rule. With this rule, customers will be aware of any revenue arrangements between brokers and subpar trading firms. Additionally, customers will have a better understanding of the transaction prices they are paying, which can help to avoid higher costs. Different trading venues may offer different prices, and slower execution can lead to missed opportunities. Information leaks can also inhibit a successful transaction, and less reliable settlement processes can delay the receipt of proceeds. As such, the proposed rule would ensure that brokers prioritize customer interests by providing them with the best execution possible. Furthermore, the SEC's enforcement actions against Robinhood and Citadel in recent years demonstrate the need for this rule. The SEC's investigation found that between 2015 and late 2018, Robinhood's customers received inferior execution prices compared to other brokers' prices for the same securities. Robinhood's inferior prices reportedly resulted in customer harm of approximately $34.1 million. Similarly, in January 2017, Citadel Securities LLC agreed to pay $22.6 million to settle charges by the SEC for allegedly misleading customers about the way it priced trades. The SEC alleged that Citadel executed customer orders at prices inferior to the best available prices, despite representations that it would seek to execute orders at the best price. According to the SEC's order, Citadel used an algorithm that executed trades at a price that was higher than the National Best Bid and Offer (NBBO) for the relevant securities. This resulted in customers receiving executions at prices that were inferior to the best available prices. The SEC found that this conduct violated Citadel's obligation to provide best execution to its customers. In light of these developments, I strongly support the proposed rule, and I urge the SEC to adopt it as soon as possible. Thank you for your attention to this important matter. Sincerely, Lars Wohlfahrt