Mar. 31, 2023
Dear Civil Servant, As a retail investor, I appreciate the efforts being made to increase competition and transparency in the market and I would like to provide feedback on the proposals. The proposed changes to rule 605 of Regulation NMS appear to be significant improvements to the market structure. It is my hope that these changes will be effective and true to their spirit. The SEC initially proposed SEC 11Ac 1-5, order execution statistics, and SEC 11Ac1-61, routing and material relationship aspects disclosures on July 28, 2000. These rules, now known as SEC Rules 605 and 606, were implemented in response to increased competition and fragmentation in the market. The SEC aimed to ensure that all investor orders, including limit orders, are practicably executed in the best interest of the investors, regardless of their origin. Brokers currently file 606 reports on a quarterly basis. However, FINRA and the SEC recently issued risk alerts regarding non-compliance with these reports. In the alerts, FINRA identified several issues such as: The findings consisted of firms publishing inaccurate information in the quarterly report on order routing, such as (these are not all the findings in the report): incorrectly stating that the firm does not have a profit-sharing arrangement or receive PFOF from execution venues; inaccurately identifying reported execution venues as “Unknown”; inaccurately identifying firms as execution venues (e.g., identifying routing broker-dealer as execution venue, rather than the exchange where transactions are actually executed) The alerts also identified issues with incomplete disclosures, such as inadequate descriptions of specific terms of PFOF and other arrangements, and incomplete descriptions of tiered pricing arrangements. Considering the issues identified in the risk alerts, I am concerned that brokers may also be non-compliant with the new 605 reports, which would provide little benefit to retail investors. The accuracy of the data contained in these reports will be critical to their usefulness. Thank you, An individual investor