Mar. 31, 2023
Support should be given to the new regulation stipulating that Citadel cannot be the initial recipient of orders; instead, these orders should be directed to a public auction where everyone, including pension funds, has equal chances to fulfill them. Payment for Order Flow (PFOF) has been effectively prohibited in the UK due to potential conflicts of interest, and this should also be applied to US markets. Brokers who refuse PFOF tend to route orders differently, resulting in better execution quality. A recent study revealed that Robinhood does not offer significant price improvement compared to exchanges, even though PFOF accounts for approximately 70% of its revenue. Retail investors who don't engage with PFOF receive better prices than those who do, which goes against FINRA's Best Execution guidelines. FINRA is currently assessing the effects of commission-free trading on member firms' order-routing practices and decisions, and these findings should be made public. TD Ameritrade's order routing choices appear to be driven by factors other than competition, despite their website's claims. They pay for early access to orders and direct them to firms that make billions of dollars from the process. Dark pools, or Alternative Trading Systems, should contribute quotes and trades to consolidated market data to increase transparency in these obscure markets. To address the unfair information advantage of wholesalers, the Commission should require brokers to initially route orders to the auction and specify the subsequent destination if the auction is unsuccessful. The current state of American markets is anti-competitive, and fair competition is crucial. The Commission must work to guarantee fair competition, particularly within the off-exchange systems that presently dominate. Best, Farris Y. Nawas, an individual investor.