Mar. 19, 2023
Dear Securities and Exchange Commission, I am writing to express my strong support for the proposed Order Competition Rule, which would require public auctions for all orders rather than allowing a single firm like Citadel to be the first to receive them. This would give everyone, including pension funds, an equal opportunity to fill orders and prevent conflicts of interest that may arise from Payment for Order Flow (PFOF) practices. As seen in the UK, PFOF has been banned due to conflict-of-interest concerns, and I believe it should be banned in US markets as well. Brokers who do not accept PFOF route orders differently and see superior execution quality, and a recent study found that Robinhood does not provide statistically significant price improvement despite PFOF being responsible for around 70% of its revenue. This is evidenced by the fact that the SEC charged Robinhood for not satisfying the best execution in 2020. They are a direct reflection of the problem and get away with the cost of doing business. Retail investors who do not deal with PFOF receive better prices than those who do, violating FINRA's Best Execution guidance. I urge the SEC to evaluate the impact of not charging commissions on member firms' order-routing practices and decisions and to make the findings public. Dark pools (Alternative Trading Systems) should provide quotes and trades to consolidated market data to bring more transparency to dark markets. 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. Fair competition is essential in American markets, especially within the off-exchange systems that currently dominate. 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. The SEC should investigate conflicts of interest among market participants to ensure that participants can objectively review the rules. Enforcement of SEC rules needs to be improved with higher fines to serve as a significant deterrent for breaking the law, and some broker-dealers should lose their licenses instead of receiving fines that amount to the cost of doing business. Every rule the SEC passes is only as good as the enforcement that backs it. I strongly believe that the fines for violating market rules should be significantly increased to serve as an effective deterrent. I also believe that some broker-dealers should lose their licenses instead of receiving fines that are nothing more than a cost of doing business. I deeply appreciate and support any efforts to reduce speed games, inducements, and the farming of individuals' orders for rebate money. The practice of routing orders first to a wholesaler, who then passes them to the auction, which might route them back to the wholesaler, is unnecessarily complex and grants the wholesaler a profound information advantage against other market participants. I am glad to see the Commission taking steps to address this unfair information advantage. I also appreciate the proposed rule's transparency requirements for dark pools and the increased competition it will bring to off-exchange systems. The current market is not fair, and this proposed rule is an essential step in the right direction. The proposed rule will also simplify the market structure, which will benefit all market participants, especially individual investors. Finally, I believe that removing the profiteering middlemen from the market will improve prices for both individuals and institutions. Wholesalers have a clear conflict of interest, and their influence can infect the ability of some participants to objectively review these rules. 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. In conclusion, I urge the SEC to ensure fair competition by reducing monopolistic behavior and removing profiteering middlemen from the market. The proposed rule to bring more transparency to dark markets should be implemented as soon as possible, and I believe this would have a positive impact on American markets. I hope you weigh the concerns of thousands of retail investors such as myself similar to those who benefit from the current status quo. Thank you for your attention to this important matter. Sincerely, Hussain Shahabuddin Citation: https://4982966.fs1.hubspotusercontent-na1.net/hubfs/4982966/BestEx%20Research%20Order%20Competition%20Rule%20Analysis%2020230105.pdf