Mar. 18, 2023
Dear Sir/Madam, I am writing to express my support for the proposed SEC rule on improving transparency and competition in off-exchange trading. I believe that every rule the SEC passes is only as good as the enforcement that backs it, and therefore, I would like to see higher fines that actually serve as a significant deterrent. I think some broker-dealers should lose their licenses instead of receiving fines that amount to nothing more than a cost of doing business - a cost that is often outweighed by the ill-gotten gains obtained through “honest mistakes”. I deeply appreciate and support any efforts to reduce the speed games that damage the integrity, credibility, and functioning of American markets. It is equally important to reduce inducements and to reduce 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 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. The current market is obviously not fair, and this proposed rule is an important step in that direction. Fair competition is incredibly important, and it’s good to see the SEC prioritizing true competition. Monopolies are bad, and there is clear monopolistic behavior here. 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% is captured by just two firms. Those figures will be even higher for specific stocks. The state of American markets is clearly anti-competitive, and that needs to change. I dislike middlemen that simply exist to get their cut of a transaction that would otherwise occur. Removing the profiteering middlemen from the market will improve prices for both individuals and institutions (e.g. pension funds). Recent research suggests that on top of the Commission's estimate that the auctions would save individuals from billions of dollars taken by wholesalers, it would also save institutions over $1.5 billion each year. Wholesalers are taking from citizens AND people's pensions - that needs to stop. I would gladly pay more per share to avoid being routed through a wholesaler, especially one with a long record of flouting the law like Citadel Securities. The parties involved have very clear conflicts of interest. Citadel is a large source of funding for many broker-dealers and is, for example, the NYSE's biggest customer. 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. Thank you for taking the time to read my thoughts on the proposed rule. I fully support the rule, and I hope it will be implemented as soon as possible. Sincerely, Anonymous