October 6, 2015
Subject: File No. SR-NASDAQ-2015-112
34-75987 Sep. 25, 2015 Notice of Filing of Proposed Rule Change to Amend Rule 4758
This proposal should bother regulators because it is not only against the interest of the exchange but it is against the public interest, as pointed out by the comment from Themis Trading. So who benefits? The marketmakers and high frequency traders would make more profit if this proposal is accepted. That indicates that the interest of the marketmakers and high frequency traders dominate at the exchange.
Does the notice of the existence of this retail order travel or does the retail order travel and get executed at alternate venues? We don't know what data travels. The data could be interpreted as inside information. That should be a concern of regulators. If the SIPC price travels, then the exchange is letting potential buyers know the prices that the ordermaker customer saw when they created the order. This is useful because the SIPC price is a stale price and the true prices/demand is known to professional traders that pay for premium information. Some of the marketmakers are internalizers who buy order flow from brokers.
I am not comfortable that an unknown committee decides a sequence/priority of market venues that receive these types of orders. While they give the factors in their proposal, there is no weighting for these. There is no justification about why the routing would be secret, unless it gives marketmakers who might be on the committee inside information. Why wouldn't the venues be all licensed venues, rather than some secret table of venues chosen by this committee? Why do they have to be chosen based on any factors?
I don't like the fact that the regulators do not seem to be looking at the systematic activity in the markets by looking at the code of the participants. I think the regulators would be shocked with the predatory nature of the code. Instead, the exchanges propose rules that might appear somewhat suspicious for the information that is left out of the exchange proposal and was certainly proposed on behalf of their major customers that will likely benefit those same major customers and once more, retail/institutional orders will be trapped doing exactly what those major customers have designed. The inaction and lack of effective deterrence allows the other participants to victimize the retail/institutional interests. The regulators appear to enable frequent trading, however this speculative trading frequently negatively impacts long-term positions.
There are always two sides to a trade. Long-term investors would rather buy or sell with interests that are owned rather than these financial intermediaries that champion these changes that benefit their businesses. Financial intermediaries do not need more accommodation in the market.
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sincerely,
Suzanne Hamlet Shatto
[email address redacted]
Seattle, WA