Mar. 30, 2023
I fully support the S7-29-22. The proposed Regulation Best Execution is a significant step towards promoting fair and efficient markets while protecting household investors. Best execution is an essential aspect of trade execution, ensuring that investors receive the best possible execution for their trades. However, for individual investors, especially retail investors, understanding the complexities involved in choosing how to execute a trade can be challenging. Therefore, clear guidance on how to read and interpret the data in Regulation NMS Rule 605 reports is essential. This would enable retail investors to make informed decisions and understand how their brokers are executing their trades. The proposed rule would also enforce brokers' duty of Best Execution, which derives from common law agency principles and fiduciary obligations. Currently, this duty is not a rule that the SEC can enforce. Therefore, the proposed rule would make it easier for the SEC to hold brokers accountable for not fulfilling their duty of Best Execution. Conflicted orders would not belong in a Best Execution rule, and the proposed rule would prevent such orders. The absence of a Best Execution rule may result in customers being unaware of revenue arrangements between brokers and subpar trading firms or paying higher transaction prices. Furthermore, different trading venues may offer different prices, and slower execution can lead to missed opportunities. Information leaks can inhibit a successful transaction, and less reliable settlement processes can delay receipt of proceeds. The proposed rule would address these issues, resulting in fairer and more efficient markets. Several cases, including Robinhood's failure to satisfy its Best Execution obligation, demonstrate the need for a more detailed and comprehensive standard. In December 2020, Robinhood was charged by the SEC for routing trades to specific firms and making misleading statements while not disclosing payments received. Similarly, Citadel paid $22.6 million in 2017 to settle best execution charges for executing customer trades at less favourable 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. The proposed rule would require quarterly reviews of execution quality, providing transparency and accountability for broker-dealers' practices. The rule would provide a more detailed and comprehensive standard for broker-dealers to follow, resulting in consistently robust Best Execution practices. Therefore, the proposed Regulation Best Execution is a necessary step in protecting household investors and promoting fair and efficient markets. Joseph Manoharan