Mar. 12, 2023
From: Anonymous Household investor Subject: Comment on Order Competition Rule, File No. S7-31-22, Release No.34-96495 Affiliation: none Date: March 12, 2023 Enforcement Every rule the SEC passes is only as good as the enforcement that backs it. I am of the opinion that a fine should deter the fined market participant from breaking said rule again. I am of the opinion that any and all advantage gained by breaking the rule should be taken away and that a punitive measure should be added to such an extent that following the letter and intent of the rule is more cost efficient than breaking it. Repeat offenders should ultimately lose their license(s). In my opinion it is detrimental to the US markets that wholesalers are allowed to continue business after being charged over 70 times by the United States government with behavior which can be viewed as violations of any laws or regulations that prohibit fraudulent, manipulative, or deceptive conduct , regardless of whether or not said wholesaler admits or denies the findings (https://files.brokercheck.finra.org/firm/firm_116797.pdf). Support of the proposed rule I support the proposed rule in so far it enhances order competition. I am of the opinion that the proposal is beneficial to the objectives of the Securities and Exchange Commission as worded in Title 15 U.S.C. 78k-1 of the U.S. legal code (https://www.law.cornell.edu/uscode/text/15/78k-1), for the reasons set out below. Participating in the market As a matter of principle I am of the opinion that a competitive, transparent, and efficient market structure for NMS stocks entails that it is in the public interest and appropriate for the protection of investors and the maintenance of fair and orderly markets to assure that fair competition among brokers and dealers, among exchange markets, and between exchange markets and markets other than exchange markets exists. This proposed rule is beneficiary to that purpose. As a matter of principle, I am of the opinion that the SEC should strife for a level playing field, in which no unfair information advantages is allowed to exist. To that effect I am particularly supportive of the following three elements of the proposed rule: 1. Public auctions come before internalization. 2. Public auctions have execution priority rules that counter a business model which seeks to exploit information advantages typically used by high frequency traders 3. Dark pools, if they want to host auctions, must become transparent and start submitting data to public feeds. Currently, retail brokers route more than 90 percent of marketable orders of individual investors to a small group of off-exchange dealers, known as wholesalers. Wholesalers typically execute these orders internally without providing any opportunity for other market participants, including institutional investors, to compete to provide more favorable prices for these orders. That is detrimental to the principles worded in the previous paragraphs. Application and exceptions I am of the opinion that the rule should apply to all “segmented orders,” as listed below: • Of a natural person or an account held in legal form on behalf of a natural person or group of related family members; and • In which the average daily number of trades executed in NMS stocks was less than 40 in each of the six preceding calendar months. Furthermore, I am of the opinion that any and all exceptions should be restrictive in nature and that the wording should be as clear and as non-ambiguous as needed to avoid any leeway in its interpretation. Removal of restricted competition trading centers I support the removal of restricted competition trading centers. In particular “market makers” are counter intuitive to the functioning of a competitive, transparent, and efficient market structure. Each time a market maker steps in to purchase shares that no one wants to buy or sell shares that no one wants to divest, they send disinformation into the market. If a stock cannot be bought at an offered bid, the buyer should increase the price (s)he is willing to pay, until a seller is willing to sell his/ her stock. If a stock cannot be sold at an offered bid, the seller should decrease the price (s)he is willing to accept, until a buyer is willing to buy the stock in question. I am of the opinion that any exception that allows for such disinformation to be send into the market should be removed from the proposed rule and should not be proposed again in any way, shape or form.