Mar. 30, 2023
Dear Ms. Countryman, I am writing to express my gratitude for your efforts to promote transparency and competition in the market. As an individual retail investor, I value the opportunity to provide my feedback on these proposals. I believe that the proposed enhancements represent a significant shift in U.S. equity market structure, comparable in importance to the implementation of Regulation NMS in 2005. Regarding the Best Execution S7-32-22, brokers typically act as agents for their clients and therefore have a duty of Best Execution based on common law agency principles and fiduciary obligations. While FINRA already has a best execution rule, I believe it is essential for the SEC to enforce it. I support the Best Execution rule, but I am concerned about the inclusion of "conflicted orders." If payment for order flow (PFOF) remains, brokers with conflicts of interest will continue to direct our orders to wherever they can obtain the highest profit. The United Kingdom has effectively banned PFOF due to conflicts of interest, and I would like to see the same policy implemented in the United States. Although they did not explicitly prohibit PFOF, the UK issued guidelines stating that it is a conflict of interest. After some market makers created their own definitions of PFOF arrangements, they reminded them that PFOF is not compatible with Best Execution. FINRA has initiated a targeted examination to evaluate the effect of not charging commissions on member firms' order routing practices and decisions, as well as other aspects of their business. FINRA has stated that it will release its results to member firms at a later time. I would like this information to be made public as soon as possible. Thank you again for your dedication to promoting transparency and competition in the market. Sincerely, Kevin Herter