Mar. 31, 2023
I am writing to emphasize the importance of best execution in trade execution for individual investors who may not fully understand the complexities involved in choosing how to execute a trade. Ensuring the best execution is vital for maintaining a fair and transparent market. To help retail investors better comprehend the markets, clear guidance on how to read and interpret the data in Regulation NMS Rule 605 reports should be provided. Brokers currently owe their customers a duty of Best Execution derived from common law agency principles and fiduciary obligations, but it is crucial to establish a rule that the SEC can enforce. Conflicted orders have no place in a Best Execution rule. Without such a rule, customers may be unaware 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, and slower execution can lead to missed opportunities. Information leaks can inhibit successful transactions, and less reliable settlement processes can delay the receipt of proceeds. In December 2020, Robinhood faced charges from the SEC for failing 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. In 2017, Citadel settled with the SEC for $22.6 million over best execution charges related to executing customer trades at less favorable pricing when better prices were 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 offer transparency and accountability for 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 receive the best possible execution for their trades. By implementing these recommendations, we can work together to foster a fair and transparent market for all participants. Sincerely, Farris Y. Nawas, an individual investor