Mar. 28, 2023
As an individual retail investor, I thank you for the effort to create more competition and transparency in the market, and I appreciate the opportunity to comment on these proposals. Investors should have access to the best priced quotations available in the national market system and such prices generally should be determined by competitive market forces. Broker-dealers route more than 90% of marketable orders of individual investors in NMS stocks to a small group of six off-exchange dealers, often referred to as “wholesalers”. The wholesaling business is highly concentrated, with two firms capturing approximately 66% of the executed share volume of wholesalers as of Q1 2022. Citadel recommended withdrawing this proposal for a number of reasons, including the unprecedented nature of requiring certain market participants to utilize a specific trading protocol. Sending my orders to a wholesaler to be internalized is a specific trading protocol that I’d rather pay commission to be able to avoid. Citadel has been front-running customer orders since 2006 (https://files.brokercheck.finra.org/firm/firm_116797.pdf) and shouldn’t be allowed to have a monopoly on retail order flow. The proposal allows for orders to go to Internalizers FIRST and then to the auction for fair competition. This still gives them a major information advantage which should be removed. Brokers should be routing directly the auction, and Internalizers should be able to trade with our orders competitively. The proposal states that customers who make over 40 trades/day will not be subject to this rule but I think they should be covered under this rule as well. Allowing as many orders as possible is beneficial for competition. My only concern is that brokers will start charging outrageous commissions or fees in lieu of PFOF, so I’d recommend a cap on the amount of commissions or fees that the brokers are allowed to charge. 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. Monopolistic wholesaler dominance of order flow has damaged my faith in American markets, and I would love to see these rules put into effect (and appropriately enforced).