Subject: S7-31-22
Form Type K
The proposed regulation aimed at promoting transparency and competition in the NMS stock market is a significant stride in the right direction towards achieving fairer markets.
One praiseworthy aspect of this regulation is its endorsement of public auctions that offer all participants equal opportunities to fulfill orders, as opposed to giving Citadel the first right. The Payment for Order Flow (PFOF) has long been a contentious issue, and the proposed prohibition of PFOF is a necessary step towards addressing conflicts of interest concerns.The findings of the study that Robinhood does not offer statistically significant price improvement, despite PFOF contributing to around 70% of its revenue, are troubling and emphasize the need to ban this practice.
The proposed regulation's emphasis on ensuring broker routing decisions are driven by competition is a laudable move. Brokers who reject any form of PFOF should not be disadvantaged, and they should be able to route orders differently and achieve superior execution quality. The necessity to evaluate the effects of not charging commissions on the order-routing practices and decisions of member firms is an essential consideration, and the results of this evaluation should be made public.
The proposal to increase transparency in dark markets by obligating dark pools to provide quotes and trades to consolidated market data is a much-needed measure. Wholesalers hold extreme influence over other market participants, and the conflicts of interest that arise from their profiteering need to be resolved. Eliminating intermediaries from the market will improve prices for both individuals and institutions, saving billions of dollars taken by wholesalers.
Overall, the proposed regulation is a positive step towards ensuring fair competition and transparency in the NMS stock market. The SEC should scrutinize conflicts of interest among market participants to guarantee that the rules are objectively reviewed, and it should enhance the enforcement of SEC rules by imposing higher fines to serve as a significant deterrent for breaking the law. The Commission should also contemplate revoking the licenses of broker-dealers who repeatedly break the rules, rather than just fining them.