Mar. 12, 2023
Dear Sir/Madam, I am writing to express my support for the recent proposed rule change by the SEC (Order Competition Rule, File No. S7-31-22, Release No.34-96495) to bring more transparency and fairness to the American markets. However, I also have some concerns and suggestions that I believe will improve the effectiveness of this rule. First, I would like to emphasize the importance of enforcement. Every rule that the SEC passes is only as good as the enforcement that backs it. I strongly believe that fines for violations should be much higher to serve as a significant deterrent. I suggest implementing a flat-rate fine, plus 500% of profit gains, as a good start. In addition, I believe some broker-dealers should lose their licenses instead of receiving fines that amount to nothing more than a cost of doing business. I fully support the proposed rule, with one exception. The rule allows for orders to go to Citadel FIRST, and then to the auction for fair competition. This still gives Citadel a major information advantage that should be removed. I suggest that brokers should route orders to the auction first, and only then, if someone doesn't take the order, be routed to Citadel. This way, the entire market has equal knowledge. I appreciate and support any efforts to reduce inducements and the ‘farming’ of individuals’ orders for rebate money. A broker routing orders first to a wholesaler, who then passes them to the auction, which might route it back to the wholesaler, seems unnecessarily complex and grants the wholesaler a profound information advantage against other market participants. I suggest abolishing this unfair information advantage by having brokers first route to the auction and specify where the order should go if the auction is unsuccessful. I also support rule changes that bring more transparency to dark markets. The investing public should have easy access to what is happening within the markets. Fair competition is incredibly important, and it’s good to see the SEC prioritizing true competition. However, I am concerned about the clear monopolistic behavior of some market participants who benefit from a dominant, anti-competitive position in the marketplace. They pay for order flow or secure it through backroom deals. I suggest that orders should compete in lit markets, and that the fragmentation of the markets makes things over-complicated in a way that only benefits large, dominant players. I prefer a simple, transparent and free market structure like the one proposed in this rule. Furthermore, I have serious concerns about wholesalers. I would gladly pay more per share to avoid being routed through a wholesaler that has been charged over 70 times by the United States government. Wholesalers exercise extreme influence on other market participants, and I am concerned that influence will infect the ability of some participants to objectively review these rules. Research has shown that internalization is bad for markets, and wholesalers are lying about the quality of their services to maintain their profits. They take billions from individuals and institutions and call it "superior performance." If they weren't around to take their cut, the savings would go to households and pensions instead of Wall St’s overstuffed pockets. Removing the profiteering middlemen from the market will improve prices for both household investors and institutions, and I suggest that this be considered in the proposed rule. In conclusion, I fully support the proposed rule change by the SEC, but I suggest that enforcement and some of the finer details of the rule be revisited to ensure a fair and transparent market for all participants. Thank you for your attention to this urgent matter. Looking forward! Chris Eastvedt