SEC to Introduce New Capital Market Rules

[mlawson71]

The United States’ Securities and Exchange Commission (SEC), the federal markets anti-manipulations agency, will be integrating new capital market rules. This order has apparently come directly from Chairperson Gary Gensler, with the goal of guaranteeing a fair market competition between brokers and exchanges.

During a virtual conference organized by Piper Sandler Gensler disclosed that his agency aims to make fair equities and to motivate market participants to embrace new market models. He also wishes to set ground rules for the “best execution” and “national best bid and offer” modelsm especially for the controversial “payment-for-order-flow” system.

The payment-for-order-flow strategy strategy became a subject of controversy during the Robinhood fiasco we saw earlier this year. Robinhood uses this model, according to which market orders are rerouted to private trading platforms in return for fees, leading to charge-free trading services. Sometimes that model, unfortunately, leads to conflict of interest, like when a broker sends the market order to a given private platform offering the best fees but not the best execution for traders.

Robinhood got penalized with 65 million US dollars for concealing its payment-for-order-flow strategy and not offering what is best for users but the company continues to use the same model.

I wonder whether the new rules will be able to prevent a similar mess happening in the future. Any thoughts?

 

[JamesJ]

Why not just make a rule, that all retail orders (or easier all orders with less than 100k $ value) have to be executed at an official ECN, accessible to all market participants.

I guarantee you, spreads would decrease dramatically. Just look at european markets where spreads are often much lower in equities with similar turnover. In europe the fraction of on-exchange volume is much larger than in the us.

Citadel and co make a killing at the moment. If you look at the tape and see all the FADF/FINRA execution it really just is a money printer and the NBBO a joke with the lack of visible size.

 

[Nobert]

Robinhood got penalized with 65 million US dollars for concealing its payment-for-order-flow strategy and not offering what is best for users but the company continues to use the same model.

Not only that, they're planning IPO(?)

Congo Rebel Leader

 

[TrailerParkTed]

The United States’ Securities and Exchange Commission (SEC), the federal markets anti-manipulations agency, will be integrating new capital market rules. This order has apparently come directly from Chairperson Gary Gensler, with the goal of guaranteeing a fair market competition between brokers and exchanges.

During a virtual conference organized by Piper Sandler Gensler disclosed that his agency aims to make fair equities and to motivate market participants to embrace new market models. He also wishes to set ground rules for the “best execution” and “national best bid and offer” modelsm especially for the controversial “payment-for-order-flow” system.

The payment-for-order-flow strategy strategy became a subject of controversy during the Robinhood fiasco we saw earlier this year. Robinhood uses this model, according to which market orders are rerouted to private trading platforms in return for fees, leading to charge-free trading services. Sometimes that model, unfortunately, leads to conflict of interest, like when a broker sends the market order to a given private platform offering the best fees but not the best execution for traders.

Robinhood got penalized with 65 million US dollars for concealing its payment-for-order-flow strategy and not offering what is best for users but the company continues to use the same model.

I wonder whether the new rules will be able to prevent a similar mess happening in the future. Any thoughts?

The fills on Schwab vs Robinhood are so different because Schwab fills midpoint or better if you don’t abuse them. Etrade has followed RH by filling at Citadel’s less than favorable price. I catch option fills below the NBBO and time and sales showed it to. Wish Schwab had a better platform, they act in customer’s interest better. Usually I don’t call to complain about a $1 because hold times suck.

 

[R1234]

The fills on Schwab vs Robinhood are so different because Schwab fills midpoint or better if you don’t abuse them. Etrade has followed RH by filling at Citadel’s less than favorable price. I catch option fills below the NBBO and time and sales showed it to. Wish Schwab had a better platform, they act in customer’s interest better. Usually I don’t call to complain about a $1 because hold times suck.

Interesting. Not a surprise etrade does that. After all they are owned by shark investment bank. I am curious about Schwab vs Fidelity though .I have accounts at both these firms and will be trading options soon. Any fill comparisons between these?

 

[TrailerParkTed]

Interesting. Not a surprise etrade does that. After all they are owned by shark investment bank. I am curious about Schwab vs Fidelity though .I have accounts at both these firms and will be trading options soon. Any fill comparisons between these?

I did tens of thousands of trades with Fidelity and nothing to write home about. Seeing Etrade morph because of MS is blatantly obvious now. I would trade heavily with Schwab if they get their act together. Price improvement is good but not enough to justify a clumsy platform.

 

[Clubber Lang]

How about the SEC makes ECN’s honor their quote for starters.
Not allow everyone to pull in a millisecond as your order routes.

 

[qlai]

Not allow everyone to pull in a millisecond as your order routes.

How about they do away with speed bumps which only allow select few to pull orders while the rest of us get run over?!

 

[JSOP]

The United States’ Securities and Exchange Commission (SEC), the federal markets anti-manipulations agency, will be integrating new capital market rules. This order has apparently come directly from Chairperson Gary Gensler, with the goal of guaranteeing a fair market competition between brokers and exchanges.

During a virtual conference organized by Piper Sandler Gensler disclosed that his agency aims to make fair equities and to motivate market participants to embrace new market models. He also wishes to set ground rules for the “best execution” and “national best bid and offer” modelsm especially for the controversial “payment-for-order-flow” system.

The payment-for-order-flow strategy strategy became a subject of controversy during the Robinhood fiasco we saw earlier this year. Robinhood uses this model, according to which market orders are rerouted to private trading platforms in return for fees, leading to charge-free trading services. Sometimes that model, unfortunately, leads to conflict of interest, like when a broker sends the market order to a given private platform offering the best fees but not the best execution for traders.

Robinhood got penalized with 65 million US dollars for concealing its payment-for-order-flow strategy and not offering what is best for users but the company continues to use the same model.

I wonder whether the new rules will be able to prevent a similar mess happening in the future. Any thoughts?

They should just ban payment-for-order flow, period! There is no payment-for-order flow allowed for the futures or commodities market so why can't they ban it for the equities and options market? The payment-for-order flow has already resulted in horrendous abuses from the brokers in retail forex so why is it still allowed in the equities and options market when there are established central exchanges existing that are fully capable of automatic order matching?

 

[qlai]

They should just ban payment-for-order flow, period!

The problem is that the brokers don’t want to invest in technology which is required to do best execution. For them to do direct routing to all exchanges would require major investments. It’s much easier to hand it off to someone who already invested heavily in execution technology and still under best execution obligations.

K, let’s assume your broker does upgrade their technology. They still will not be as good as HFTs /MMs. So you will see execution quality go way down and commissions go up.

What we need, imho, is to make sure there are minimum uptime and latency requirement for everyone. This way the customer can compare execution quality and decide what broker to choose. Transparency plus competition.