Mar. 19, 2023
I fully support the rule. Please implement this rule as soon as possible. I deeply appreciate and support any efforts to reduce the speed games that damage the integrity, credibility, and functioning of American markets overseen by the commission. Without enforcement and high penalties the monopolistic control wholesalers have over markets overseen by the commission will continue to erode investor (particularly household investor) confidence in our markets. Increased competition and equal information is good for market function. Why it matters: The current market structure does not provide equal information or opportunity to participants, especially household investors. [1] [2] Enforcement and high penalties are necessary to improve market function. A broker dealer consistently and intentionally making more money through violations and "honest mistakes" than they pay in fines should lose their license and participating individuals at these firms barred from working at a place with a license for a considerable length of time (a decade). There is clear monopolistic behavior [3] causing active bleeding here [4]. Middlemen are taking their cut of a transaction that would otherwise occur and aid with true price discovery, capital formation, and capital allocation. In nature, we call these organisms which take resources from another without providing anything in return parasites. The data clearly demonstrates these parasitic large firms are taking billions from retirement funds, pensions, and households. Active bleeding means this rule needs to be implemented quickly. Why it really matters: Markets overseen by the commission exist in competition with other alternatives. Since early 2020, a decentralized, loosely coordinated and highly motivated subset of people have taken to learning and educating themselves on how markets overseen by the commission actually work. This movement is capable of processing information at a scale, with a level of complexity, and with a multitude of perspectives never seen before. Mediated by rich, immediate information flow it is a new kind of thing not seen before (or well understood) in our society. To convince households to look for alternatives outside of the markets overseen by the commission (or the CFTC, etc) all this subset of people need to do is explain how our markets really work. The decision to reduce participation in or exit markets overseen by the commission is a side effect of education and informational symmetry. This subset of people is consistently growing in number, sophistication, and informed conviction. This author will note all that is required to cause a majority to succumb to the preferences of a tiny minority is an even distribution of intolerant individuals. What is actually at stake here is the confidence of an entire generation of investors who are actively evaluating if participation in the markets overseen by the commission in any capacity are in their best interest. This author observes the evaluation is ongoing and competition is occurring both inter- and intra-market and is relevant to deciding how quickly to pass and implement this rule. This author would like to reiterate their full support for the effort and attention from the commission as well expressing their full support for passing and implementing this rule as quickly as possible. [1] 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 also grants the wholesaler a profound information advantage against other market participants: they get to see orders well before anyone else. The Commission should address this unfair information advantage by having brokers first route to the auction and specify where the order should go if the auction is unsuccessful. That way the entire market has equal knowledge. [2] The current rule forces dark pools (Alternative Trading Systems) to provide quotes and trades to consolidated market data IF they wish to operate as an auction. I fully support and appreciate rule changes like this that bring more transparency to dark markets. The investing public should have easy access to what is happening within the markets. [3] The Commission notes that 90% of marketable orders of individual investors in NMS stocks go to a small group of six off-exchange dealers, and 66% are captured by just two firms. Those figures will be even higher for specific stocks. and https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4070056 [4] Dave Lauer made this point beautifully: "Wholesalers are lying about the quality of their services to maintain their profits and it makes me sick. For example, Commission analysis of CAT data in infra Table 20 found that, on average, 51% of the shares of individual investor marketable orders internalized by wholesalers are executed at prices less favorable than the NBBO midpoint. Out of these individual investors shares that were executed at prices less favorable than the midpoint, on average, 75% of these shares could have hypothetically executed at a better price against the non-displayed liquidity resting at the NBBO midpoint on exchanges and NMS Stock ATSs."