Apr. 02, 2023
Dear Securities and Exchange Commission, I am writing to express my support for the new rule that states Citadel cannot be the first to receive orders; instead, orders must go to a public auction where everyone, including pension funds, has an equal opportunity to fill the order. I believe this change is necessary to ensure fair competition within off-exchange systems that currently dominate the market. As you are aware, Payment for Order Flow (PFOF) has been effectively banned in the UK due to conflict-of-interest concerns – and I believe this should be the case in US markets too. Brokers who do not accept any kind of PFOF route orders differently and consequently see superior execution quality. A recent study found that Robinhood does not provide statistically significant price improvement relative to exchanges, despite PFOF being responsible for around 70% of its revenue. Retail investors not dealing with PFOF get a better price than those dealing with it, violating FINRA's Best Execution guidance. I also believe that FINRA's evaluation of the impact of not charging commissions on member firms' order-routing practices and decisions should be made public. TD Ameritrade's order routing decisions don't seem to be motivated by competition despite what they state on their website, and they pay to get the first look at orders, routing them to firms that net themselves billions of dollars in the process. Dark pools (Alternative Trading Systems) should provide quotes and trades to consolidated market data to bring more transparency to dark markets. The proposed rule to bring more transparency to dark markets should be implemented as soon as possible. The Commission should address the unfair information advantage of wholesalers by having brokers first route to the auction and specify where the order should go if the auction is unsuccessful. Wholesalers exercise extreme influence on other market participants, and there are conflicts of interest that may infect the ability of some participants to objectively review the rules. Furthermore, I believe that wholesalers are taking billions from individuals and institutions and calling it "superior performance" while lying about the quality of their services to maintain their profits. Removing middlemen from the market will improve prices for both individuals and institutions, such as pension funds. The auctions would save individuals billions of dollars taken by wholesalers. In order to ensure fair competition, the Commission should reduce monopolistic behavior and remove profiteering middlemen from the market. The enforcement of SEC rules needs to be improved with higher fines to serve as a significant deterrent for breaking the law. Some broker-dealers should lose their licenses instead of receiving fines that amount to a cost of doing business. In conclusion, fair competition is essential for the state of American markets, and I believe the SEC has a responsibility to ensure that competition remains fair. I urge you to take action on the issues outlined above and make changes that will benefit both individuals and institutions. Thank you for your attention to this matter. Sincerely, August Larsson, a concerned investor in the American markets.