Mar. 12, 2023
Dear friends at the SEC, Rule S7-31-22 mandates that investors should have access to the most favorable quotations in the national market system, which are typically determined by competitive market dynamics. It should not be feasible to pay exorbitant amounts for retail orders to gain control over the entire market. Citadel advised against implementing this proposal due to various reasons, including the unprecedented requirement of specific trading protocols for certain market participants. I prefer not to follow the specific trading protocol of sending my orders to a wholesaler for internalization and would rather pay a commission instead. It is unfair for a wholesaler like Citadel, which has been front-running customer orders since 2006, to have a monopoly over retail order flow. My only worry is that brokers might start charging excessive commissions or fees instead of payment for order flow (PFOF), so I suggest placing a cap on the amount they can charge. I trust the SEC's economic analysis, which predicts that individual investors could save up to $2.35 billion on transaction costs due to increased competition in supplying liquidity to marketable orders, resulting in lower transaction costs for individual investors, improved order execution quality for institutional investors, and better price discovery. In a video by the SEC Historical Society titled "Regulation and Market Structure from ATS to NMS" published on June 1, 2018, Dr. Richard R. Lindsey, who served as a division director from 1995-1998, stated that promoting competition in the marketplace was crucial for better market regulation. He believed that removing barriers to competition was more important than designing the market. I agree with this viewpoint, and I believe PFOF's conflicted nature is one of the obstacles to competition. Thank you for your time, Alex Z