Mar. 26, 2023
March 26, 2023 What a great proposal. I am sure there are better ways to manage order flow, but forcing an auction on an open and competitive market before funneling the orders elsewhere seems like a clear improvement on our current system. Research supports that premise (https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4070056). This is a no-brainer for anyone whose business model does not depend on skimming profits from the spread at the expense of household investors. There is no valid reason that orders should not compete in lit markets. We should implement this immediately. There is no need for delay. In fact, I have serious doubts as to the motivations of any entity pushing for such a delay. I would suspect them of either benefitting from the flaws and unfairness in our current system directly, or being subject to the influence of those who do. Concerningly, that applies to most of Wall Street, from broker-dealers who depend on entities like Citadel for funding, to the NYSE who depends on entities like Citadel as its biggest customers. They have inherent conflicts of interest and cannot review these rules objectively. As much as I support this rule, I think it could be improved with the addition of some bigger teeth. We need to attach real consequences to entities which violate this rule. In the wake of the rollback of stricter regulations, we have seen that Wall Street is motivated by profiteering more than morals or ethics (if indeed they engage in any consideration for either ethics or morals at all). If something is legal and immoral and makes money, they will do it. If something is illegal and immoral and makes money (and the fines are smaller than the associated profits and there are no personal consequences for the offenders) they will do it. We need consequences that cannot be flouted as a cost of doing business. Offenders should be personally liable, and fines should be assessed as a scalar greater than 1.0 applied to their gains from the illegal activity. If an entity makes a billion dollars breaking these rules, the entity should be fined significantly more than a billion dollars. Repea t offenders should lose their licenses. Furthermore, individuals at the highest levels of any organization found responsible for a violation should be fined personally and face jail time personally. Anything less is effectively inviting rule-breaking for those who can afford it. Furthermore, why do we need a wholesaler between the broker and the auction? This adds nothing of value to the auction process, while conferring an information advantage to the wholesaler who will have information on the order before anyone else, undermining the freedom and fairness of the market. Instead, we should route the orders directly to the auction first, ensuring that all participants enjoy parity in the timeliness and availability of the information informing their interactions with the market. If the auction fails, then the order could be routed elsewhere. Finally, in no particular order: - I fully support any efforts to reduce the impact of rapid-fire, algorithmic trading that undermine the credibility, integrity, fairness, and function of our markets. - There is clear monopolistic behavior here, and it should not continue. The Commission notes that the vast majority of marketable orders from individual investors in NMS stocks is attributable to just six off-exchange dealers, with roughly two thirds of the volume being captured by just two firms. The state of American markets is clearly anti-competitive and that needs to change. - I would gladly pay commission to avoid being routed through a wholesaler such as Citadel Securities, LLC which has been charged over 70 times by the United States government for regulatory violations. (https://files.brokercheck.finra.org/firm/firm_116797.pdf) I am confident that most household investors share this sentiment.