Mar. 30, 2023
Dear SEC, I am writing to express my concerns about your recent OCR proposal and the issue of abusive internalization in the securities markets. As you are aware, companies are currently trading, in some cases, 74% off exchange, which is a worrying trend that needs to be addressed. Abusive internalization occurs when broker-dealers execute orders internally, rather than sending them to the public markets. This can lead to price discrepancies and a lack of transparency, which is harmful to investors. It also enables market participants to engage in predatory trading practices, which can negatively impact the integrity of the securities markets. I believe that your proposed OCR rule is a step in the right direction in addressing this issue. By requiring broker-dealers to display their best prices on public exchanges, you can improve market transparency and prevent predatory trading practices. However, I also urge you to consider further measures to address the root causes of abusive internalization. One potential solution is to impose stricter regulations on broker-dealers to ensure that they are acting in the best interests of their clients. This could include requiring them to disclose more information about their internalization practices and the prices they are offering. It could also involve limiting the extent to which they can execute trades internally, and mandating that they prioritize public exchanges when executing orders. I urge you to take action to address this issue and V, protect the integrity of the securities markets. As you are aware, companies are currently trading, in some cases, 74% off exchange, which is a worrying trend that needs to be addressed. Abusive internalization occurs when broker-dealers execute orders internally, rather than sending them to the public markets. This can lead to price discrepancies and a lack of transparency, which is harmful to investors. It also enables market participants to engage in predatory trading practices, which can negatively impact the integrity of the securities markets. I believe that your proposed OCR rule is a step in the right direction in addressing this issue. By requiring broker-dealers to display their best prices on public exchanges, you can improve market transparency and prevent predatory trading practices. However, I also urge you to consider further measures to address the root causes of abusive internalization. One potential solution is to impose stricter regulations on broker-dealers to ensure that they are acting in the best interests of their clients. This could include requiring them to disclose more information about their internalization practices and the prices they are offering. It could also involve limiting the extent to which they can execute trades internally, and mandating that they prioritize public exchanges when executing orders. The complexity of our markets makes it hard to know what’s happening with our money and transactions – and the best solution is more transparency and clear disclosures. Unfortunately, existing disclosures are (at best) outdated or (at worst) intentionally opaque or misleading. Simplifying markets will help to address this, but disclosure requirements must be modernized and then continually updated. Point-in-time disclosure standards are inadequate, and must be continuously updated over time using the SEC’s authority of retrospective review. There are holes in our regulatory disclosure framework that must be addressed, including Single Dealer Platforms (SDPs) that transact significant market share, securities lending, 13Fs, and the ability for brokers to expunge their records. The opacity and complexity of markets has further removed individual investors from their investments, and from directly interacting with issuers. We aim to reconnect investors and companies, and modernize our framework for purchasing and holding securities. I urge you to take action to address this issue and protect the integrity of the securities markets. Thank you for your attention to this matter. Sincerely, Jane-Marie Fajardo