Mar. 31, 2023
Good evening. Thank you for the opportunity to comment on proposed rule S7-31-22; release No. 34-96495. As a household investor, I am very concerned about the state of the current markets. This includes the amount of data that is hidden within the current system, professional entities front running household investor trades, the repeated delay in the release of swap data, the repeal of previous regulations brought about by system failures, the failure of enforcement of existing rules and regulations, failures of self-regulating entities to comply with rules and regulations, waiving of margin requirements at will solely for the benefit of professionals, the trading restrictions placed on household investors by professional entities due to their failure to hedge risk, the ability of professionals to continue trading during halts on securities, spoofing trades to affect the security price and bid/ask spread, the failure of household investor purchases to affect price discovery, the internalization of household security purchases, the failure of household investors to obtain the best price for their securities, the conflict of interest of professional entities used to bend markets to their benefit, ability to continuously fail to deliver sold securities, failure of the system to force deliveries or reverse trades, failure to settle trades in a timely manner give the current state of technology, the use of algorithms to enact high frequency trading strategies, central clearing of trades by an extension of large bank entities, beneficial ownership by household investors where voting rights are not guaranteed, a system where votes are reduced to match the official released security numbers regardless of the quantity of actual securities sold, unaudited central clearing houses; professional entities claiming to represent household investors in an effort to receive favorable regulations; just to name a few. This proposed rule begins to address some of the above listed concerns. I support that the new rule would prohibit market makers, et al, from being 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 that Payment for Order Flow (PFOF) has been effectively banned in the UK due to conflict-of-interest concerns, and it is due time that the US enact the same protections. It has been shown that, Brokers who do not accept any kind of PFOF route orders differently and consequently see superior execution quality. A recent study found that the Robinhood trading model does not provide statistically significant price improvement relative to exchanges, despite PFOF being responsible for around 70% of its revenue. PFOF violates FINRA's Best Execution guidance as retail investors not dealing with PFOF get a better price than those dealing with it. FINRA is known to be evaluating the impact of not charging commissions on member firms' order-routing practices and decisions, these findings should be made public. TD Ameritrade's order routing decisions cannot be seen to be motivated by competition despite what is publicly stated on their website. TD Ameritrade pays 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 not exist forcing trades to lit markets. The failure to close all alternate trading systems will result in continued lack of market transparency. At a minimum, alternate trading systems should be required to provide quotes and trades to be consolidated into lit markets to bring more transparency to dark markets. Providing fair markets for non-professional investors is essential, the Commission needs to ensure fair competition, especially within the off-exchange systems that currently dominate. In addition, the Commission should address the unfair information advantage of wholesalers by having brokers first route to the auction and then specify where the order should go if the auction is unsuccessful. Recent events and publicly sourced information show that, wholesalers exercise extreme influence on other market participants, and that there are conflicts of interest that may affect the ability of some participants to objectively review the proposed rules. This is evidenced by wholesalers are receiving billions from individuals and institutions for what they have determined is "superior performance" while lying about the quality of their services to maintain their profits. The commission should seek to remove middlemen from the market in order to improve prices for both individuals and institutions, such as pension funds. The auctioning of orders would prevent household investors from losing billions of beneficial execution to wholesalers. A fair market should ensure fair competition by reducing monopolistic behavior and removing profiteering middlemen from the market structure. The proposed rule to eliminate alternative trading system should be implemented as soon as possible to force transparency to lit markets. The Commission should be investigating conflicts of interest among market participants to ensure that participants can objectively review the rules. The Commissions enforcement of rules and regulations needs to be improved. Failure to deliver securities should be forced to settle or reversed. Continued failures to deliver securities should not be possible. Rule and regulation violations should be assigned fine amounts that will serve as a significant deterrent for breaking the law. The perpetrator should not be able to make any profit for improper behavior. Furthermore, repeat offenders should lose their licenses instead of receiving fines that amount to a cost of doing business. Offenders should be made to admit fault, return profits, and should not be eligible to start new businesses in the financial sector. Thank you for your consideration. Sincerely, A Concerned US Citizen