July 22, 2015
The issuance and acceptance of subpenny quotes and transactions must continually be examined for fairness and evenness of access to all market participants. The proposed rules, including changes to Rule 7.6, to nominally eliminate obsolete terms, and continue allowance of .0001 increments for quotes and transactions must be evaluated to determine whether, in combination with market participant size, volume, and means of transactions, such smaller than .01 increments promote fairness for all customers, not merely high volume or high frequency customers.As an article by Mark Melin entitled UBS Counters Michael Lewis, Claims HFT Not Given Advantages, May 6, 2015 points out, and SEC report noted that UBS failed to properly disclose an order type pitched "almost exclusively to market makers and high-frequency trading firms." This order type allowed certain subscribers to buy and sell securities with orders priced in increments of less than one cent. As Michael Lewis explained in the article, this allowed HFT traders to jump ahead of other buyers for an offer to sell a share at $80.00 by offering $80.001for the share.
So when a rule is proposed for increased liquidity or price improvement, the question must always be asked, price improvement for whom, ie cui bono? If the increased liquidity or price is for high value, large market participants, to the detriment of retail investors, is there a real benefit in terms of trust in the market by the general public and economic value to public investors as opposed to high volume traders. While the proposed rule changes for obsolescence may be appropriate, the SEC should have a list of questions and checklist which begins, do these rules and resulting market structure offer equal benefits to all market participants, including retail investors, or are they biased for traders who make up much of a market's volume and profitability
This criterion, fairness and evenhandedness of effect on both retail and wholesale, large volume traders, should be explained in connection with this,and all future SEC regulated markets seeking to change their rules.