Mar. 31, 2023
To whom it may concern, I am writing this both as a concerned citizen who wants a free and fair market, but also as a financial professional who desires fair practices for the sake of my clients. Payment for Order Flow has time and time again shown to not lead to best execution. It has become apparent that larger internalizers seek not to find best execution for retail trades, but to widen spreads and make more money front running or "skimming off the top". The current market structure is uncompetitive, and should never have been allowed in the first place. Citadel and Virtu account for a majority of order flow in our markets, and the advantage they receive for internalizing such a large share of trades via the data disparity alone should necessitate immediate change. There is an incredible amount of money at stake for these companies, but I think they can speak for themselves. For example, before PFOF was allowed, Citadel's position was quite different. In a letter to the SEC in 2004 on whether PFOF should be allowed in our markets, Citadel Group said "The practice of payment for order flow creates serious conflicts of interest and should be banned" as well as "Internalization without meaningful price improvement reduces competition, limits price discovery, leads to market fragmentation, and should be banned". It is clear that before Citadel was the company profiting off of PFOF, they thought it a corrupting practice that was bad for the health of our markets. We are currently entrenched in a system of middlemen, who seek not to produce improvements in market structure or efficiency, but to ensure they maintain a relatively risk free cut of the system's wealth generation. PFOF has been rightfully banned in many countries already, for similar concerns. A public auction system is highly preferable to the current PFOF system, and will naturally lead to more competitive markets. To say our markets are currently free and fair would unfortunately be incorrect. With the current system of order routing and internalization, true price discovery itself is impossible. The SEC must act to rectify these very real dangers to the health and stability of our financial system. For these reasons, I urge the SEC to move forward with the proposed rule changes as soon as possible. Sincerely, Trevor Capestany