The Commission should withdraw this proposed rule. The proposal, which Chair Gary Gensler describes as requiring marketable orders of individual investors “to be exposed to competition on an order-by-order basis in qualified auctions,” seeks to micromanage order routing in equities markets under the guise of promoting “a more competitive, transparent, and efficient market structure for NMS [National Market System] stocks, with resulting benefits to investors.” By micromanaging order routing, however, this proposed rule is, itself, anticompetitive and may harm, rather than benefit, retail investors.
Section 11A of the Securities Exchange Act sets forth objectives for the Commission to facilitate a National Market System, including the “economically efficient execution of securities transactions,” and “fair competition among brokers and dealers, among exchange markets, and between exchange markets and markets other than exchange markets.” The statute, however, does not define what is meant by efficiency or competition.
Contrary to this proposal’s suggestion that competition requires order-by-order competition, competition often occurs in our securities markets at the level of the trading venue. This proposal, however, treats such competition as disfavored, and somewhat confusingly downplays the dynamic nature of venue-level competition at the same time the Commission proposes rule changes, such as its Best Execution rule proposal, aimed at fine-tuning broker obligations under such competition.