SEC to Introduce New Capital Market Rules

[zdreg]

It is the old wall street crowd i.e. market makers trying to gain back their advantages that they lost to the pay for order flow group. For decades the market makers ripped off the public with their franchises by buying on the bid and selling on the ask. Zero commissions +price improvements out to four decimal places for has made trading profitable for me and many others.
If you feel that payment for order flow brokers are ripping you off go to a broker that doesn't receive payment for order flows.

The biggest rip-off in the brokerage industry has been brokers with minimum ticker charges. I traded a lot less because of those commission charges. Loose loose situation for everyone. I remember market makers screaming bloody murder when minimum quotes when quotes when from fraction to decimals then from .05 to .01.

 

[zdreg]

What we need, imho, is to make sure there are minimum uptime and latency requirement for everyon

That is not a free market solution. that is just creating high barriers to entry. there are numerous investors who don't care about those qualities but are interested in other services that a broker may provide.

 

[Ninja Mobile Trader VPS]

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?

Not sure about the fill comparisons, but here is an interesting data point for you to consider.

Schwab, which also owns TD Ameritrade, disabled buying GME during the GME hype in late January. Schwab, TD Ameritrade, Robinhood, Interactive Brokers, and others all disabled buying GME supposedly because their margin requirements were increased by their clearing houses.

https://www.investmentnews.com/fidelity-hosts-a-reddit-ama-but-robinhood-steals-the-show-202735#:~:text=While Fidelity was not among,for its customers and Fidelity.

Fidelity was one of the only retail brokerages that did NOT have any restrictions. Unlike so many of these other brokerages, Fidelity is privately-owned and has a massive amount of their own capital.

Fidelity also does not engage in payment for order flow, like all the other retail brokers: https://www.investopedia.com/fideli...sn't engage in,market maker execute the order.

Sounds like Fidelity doesn't get paid by Citadel for order flow, and so weren't incentivized to restrict GME trading.

A counter point is I've never tried their Active Trader Pro application, so not sure how it compares to ThinkorSwim for TD Ameritrade, and coming soon to Schwab.

 

[R1234]

Not sure about the fill comparisons, but here is an interesting data point for you to consider.

Schwab, which also owns TD Ameritrade, disabled buying GME during the GME hype in late January. Schwab, TD Ameritrade, Robinhood, Interactive Brokers, and others all disabled buying GME supposedly because their margin requirements were increased by their clearing houses.

https://www.investmentnews.com/fidelity-hosts-a-reddit-ama-but-robinhood-steals-the-show-202735#:~:text=While Fidelity was not among,for its customers and Fidelity.

Fidelity was one of the only retail brokerages that did NOT have any restrictions. Unlike so many of these other brokerages, Fidelity is privately-owned and has a massive amount of their own capital.

Fidelity also does not engage in payment for order flow, like all the other retail brokers: https://www.investopedia.com/fidelity-vs-robinhood-4587945#:~:text=Fidelity doesn't engage in,market maker execute the order.

Sounds like Fidelity doesn't get paid by Citadel for order flow, and so weren't incentivized to restrict GME trading.

A counter point is I've never tried their Active Trader Pro application, so not sure how it compares to ThinkorSwim for TD Ameritrade, and coming soon to Schwab.

as a user of all three (active trader pro, street smart edge and tos) I would say that atp is totally sufficient for order entry, for my trading style. Their charting does suck though and I find myself using TOS for charts.

 

[qlai]

there are numerous investors who don't care about those qualities but are interested in other services that a broker may provide.

I am not asking for mandatory minimum latencies, but for full disclosure of latencies. But I am pretty sure you do care about latencies because they are directly related to execution quality.

 

[JSOP]

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.

Well it's new rules that lead to new innovations. If SEC REALLY bans payment for orderflow, those brokers will have no choice but to comply and send all of our orders to the exchanges as what they were supposed to do in the first place. Payment for orderflow was never a requirement it was a scheme for the brokers to make more money at the expense of the investors. For those brokers who don't invest in the technology to send orders directly to exchanges when they were supposed to in the first place will just be left out in the dust watching the MM's take their place and offer the same service with more competitive commissioni. So their choice, either innovate or die.

For us customers, we are not going to waste our time and energy to compare and deduce execution quality or latency. You can't anyway because the exchanges and brokers are so different. And besides what are you going to do when they publish the latency? Are you going to trust it first of all? And what if it's high? What are you going to do? We will still be at status quo. No if you are going to change something, there is no half-way, you either do it all the way or you don't do anything. Once payment for order flow is banned and everybody sends orders to exchanges, that's transparency and competition right there, both achieved all at once! If the Futures market and stock/options markets around the world don't have payment for orderflow and do fine, that means we don't need it either for the stock and options market in the US.

 

[qlai]

And besides what are you going to do when they publish the latency? Are you going to trust it first of all? And what if it's high?

I am going to trust it because these numbers are already provided to Finra. So you can ask a question like - why is it taking four times as long to send my order to the exchange from broker A vs broker B? Basically, latency is what enables HFTs/Internalizers to play around with your orders.

Once payment for order flow is banned and everybody sends orders to exchanges, that's transparency and competition right there,

It’s very simple, currently, dumb order flow is sold to HFTs/MMs. If you ban it, brokers will simply pay to bring the technology used by HFTs in-house. So essentially, every broker will run a small HFT co-lo’d module. The end result will be the same.

If the Futures market and stock/options markets around the world don't have payment for orderflow and do fine, that means we don't need it either for the stock and options market in the US.

Well, I grew up in village without drinkable tap water and also did fine.

 

[JSOP]

I am going to trust it because these numbers are already provided to Finra. So you can ask a question like - why is it taking four times as long to send my order to the exchange from broker A vs broker B? Basically, latency is what enables HFTs/Internalizers to play around with your orders.

Where do you check it on Finra?

It’s very simple, currently, dumb order flow is sold to HFTs/MMs. If you ban it, brokers will simply pay to bring the technology used by HFTs in-house. So essentially, every broker will run a small HFT co-lo’d module. The end result will be the same.

Doesn't matter. The order will be matched against and executed on an exchange against millions, billions of other orders. Right now it's been executed by an MM that's many times related to the broker. That's the problem. The main issue with payment for order flow isn't execution speed, it's potential conflict of interest in the sense that we are not getting the best price possible and the fact that the broker is trading against us via MM's that have paid to them to take the other side of our trade.

 

[qlai]

Where do you check it on Finra?

It’s not available to public, but this data is reported via CAT https://www.catnmsplan.com/guidance/clock-synchronization

The order will be matched against and executed on an exchange against millions, billions of other orders.

Are you saying that Internalization should be banned too? Let’s say both PFOF and Internalization are banned and all orders must be sent directly to exchanges. Well, the for-profit exchanges have been very friendly to HFTs, so you end up in the same situation where your order interacts with predatory HFT algos which are co-lo’d and have access to all the disclosed and undisclosed order types.
There are no easy solutions, as usual.

 

[JSOP]

It’s not available to public, but this data is reported via CAT https://www.catnmsplan.com/guidance/clock-synchronization

Well that's no good for us public to compare latency rates between brokers if we can't even see them. LOL

Are you saying that Internalization should be banned too? Let’s say both PFOF and Internalization are banned and all orders must be sent directly to exchanges. Well, the for-profit exchanges have been very friendly to HFTs, so you end up in the same situation where your order interacts with predatory HFT algos which are co-lo’d and have access to all the disclosed and undisclosed order types.
There are no easy solutions, as usual.

Well yes. What's the point of central exchanges if people can just trade against you by taking the other side of your trade and know all your positions, know your stops, your tp, and everything? This is like playing poker but showing your opponents your hand. The HFT had been there for a long time now and as long as you are not scalping, they are not a really big issue. But price anonymity and fair trading is an issue. And this is important regardless of whether you are scalping or not.