Mar. 19, 2023
Dear SEC, I am writing to express my support for fair competition in US markets and to promote a number of measures that would help to achieve this goal. The current state of American markets is anti-competitive, and it is essential that the Commission takes action to ensure that all market participants have an equal opportunity to succeed. Firstly, I fully support the new rule that states that Citadel cannot be the first to receive orders. Instead, orders must go to a public auction where everyone, including pension funds, has an equal opportunity to fill the order. This measure will help to level the playing field and ensure that all market participants have an equal chance of success. Secondly, Payment for Order Flow (PFOF) has been effectively banned in the UK due to conflict-of-interest concerns – and this should be the case in US markets too. Brokers who do not accept any kind of PFOF route orders differently and consequently see superior execution quality. A recent study found that Robinhood does not provide statistically significant price improvement relative to exchanges, despite PFOF being responsible for around 70% of its revenue. Retail investors not dealing with PFOF get a better price than those dealing with it, violating FINRA's Best Execution guidance. The Commission should address the unfair information advantage of wholesalers by having brokers first route to the auction and specify where the order should go if the auction is unsuccessful. Thirdly, FINRA is evaluating the impact of not charging commissions on member firms' order-routing practices and decisions, and the findings should be made public. TD Ameritrade's order routing decisions don't seem to be motivated by competition despite what they state on their website, and they pay to get the first look at orders, routing them to firms that net themselves billions of dollars in the process. Fourthly, dark pools (Alternative Trading Systems) should provide quotes and trades to consolidated market data to bring more transparency to dark markets. The proposed rule to bring more transparency to dark markets should be implemented as soon as possible. Fifthly, wholesalers exercise extreme influence on other market participants, and there are conflicts of interest that may infect the ability of some participants to objectively review the rules. Wholesalers are taking billions from individuals and institutions and calling it "superior performance" while lying about the quality of their services to maintain their profits. Removing middlemen from the market will improve prices for both individuals and institutions, such as pension funds. The auctions would save individuals billions of dollars taken by wholesalers. Lastly, the enforcement of SEC rules needs to be improved with higher fines to serve as a significant deterrent for breaking the law. Some broker-dealers should lose their licenses instead of receiving fines that amount to a cost of doing business. The SEC should investigate conflicts of interest among market participants to ensure that participants can objectively review the rules. In conclusion, fair competition is essential, especially within the off-exchange systems that currently dominate. The Commission should ensure fair competition by reducing monopolistic behaviour and removing profiteering middlemen from the market. I urge you to consider these measures to help promote fair competition in US markets. Thank you for your attention to this matter. Sincerely, Sony