Mar. 31, 2023
To whom it may concern: I am sending this message to voice my concern regarding the market as we currently experience it. As an investor, it has become very clear that the Market Makers (MM) of today experience, what I would consider, unfair advantages over retail investors, such as myself. These advantages include PFOF. Any fines that a MM experience are so minuscule, that the fines themselves are considered a cost of doing business. I would like to see higher fines that actually serve as a significant deterrent for these financial entities. I also believe that 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 fully support the rule, please implement it as soon as possible. I deeply appreciate and support any efforts to reduce the speed games that damage the integrity, credibility, and functioning of American markets, and any efforts 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, is unnecessarily complex and 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 rule forces dark pools (Alternative Trading Systems) to provide quotes and trades to consolidated market data IF they wish to operate as an auction. I fully support rule changes like this that bring more transparency to dark markets. The investing public should have easy access to what is happening within the markets. Competition is good for everyone who wishes to participate. 15 U.S.C. 78k-1 (“section 11A”) states that "It is in the public interest and appropriate for the protection of investors and the maintenance of fair and orderly markets to assure ... fair competition among brokers and dealers, among exchange markets, and between exchange markets and markets other than exchange markets." For far too long, the market has not be enduring fair competition, especially within the off-exchange systems that currently dominate. It's good to see the Commission is beginning to take their mandate more seriously. Monopolies are bad, and there is clear monopolistic behavior here. The Commission notes that 90% of marketable orders of individual investors in NMS stocks 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 this must change. 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. There are clearly some market participants benefiting from a dominant, anti-competitive position in the marketplace. They pay for order flow or secure it through backroom deals. It is blatantly obvious that orders should compete in lit markets, and I commend the Commission for finally realizes this. Fragmentation of the markets makes things over-complicated in a way that only benefits large, dominant players. I prefer a more simple, transparent, and free market structure like the one proposed in this rule. WHOLESALERS ARE BAD I would begrudgingly pay more per share to avoid being routed through a wholesaler that has been charged over 70 times by the United States government (https://files.brokercheck.finra.org/firm/firm_116797.pdf). I might even pay commission to avoid being routed through a wholesaler, especially one with a long record of flouting the law, like Citadel Securities has. 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. Research heavily suggests that internalization is bad for markets https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4070056 Wholesalers are misleading the public, and possibly outright lying about the quality of their services to maintain their profits, which does not sit well with me. For example, Commission analysis of CAT data in infra Table 20 found that, on average, 51% of the shares of individual investor marketable orders internalized by wholesalers are executed at prices less favorable than the NBBO midpoint. Out of these individual investors shares that were executed at prices less favorable than the midpoint, on average, 75% of these shares could have hypothetically executed at a better price against the non-displayed liquidity resting at the NBBO midpoint on exchanges and NMS Stock ATSs. (DON'T COPY THIS PART - this is a quote from dlauer so credit to him). Much of the time, middlemen are unnecessary, and this is one of those instances where the middleman exists simply to get a cut of a transaction that would otherwise occur. I would prefer that money go to other uses, such as welfare for the poor, instead of corporate welfare for the wealthy, aka wall st billionaires. The data clearly demonstrate that wholesalers are taking billions from individuals and institutions and calling it "superior performance". They might massage their numbers to protect their profits, but we know better. If they weren't around to take their cut, the savings will go to citizens and pensions instead of into Wall Steet's overstuffed pockets. It is clear to me how removing the profiteering middlemen from the market will improve prices for both individuals and institutions (e.g. pension funds). Recent research by Hittal Mittesh 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 - this needs to end. Citation: https://4982966.fs1.hubspotusercontent-na1.net/hubfs/4982966/BestEx%20Research%20Order%20Competition%20Rule%20Analysis%2020230105.pdf