Crypto lender BlockFi lays off 20% of its staff


The idea, along with several other significant changes being considered by the SEC, could mean that retail stock orders get executed at auctions rather than directly with wholesalers who currently control the vast majority of stock order execution. detail.

“I have asked staff to make recommendations to the Commission regarding: How do we improve order-to-order competition? Now this can be done through open and transparent auctions, or other means” , Gensler said. “It could be that segment investors get the midpoint or better, and then there could be this auction mechanism.”

Gensler said the market needs more “order-by-order competition” — better prices for each individual trade. This auction system could solve this problem. He noted that US options markets have an auction system and this could be used to help guide changes.

Currently, retail orders are executed primarily by wholesalers, while exchanges such as the NYSE or Nasdaq handle large institutional orders. Analysts have argued that this segmentation results in lower prices for retail and institutional trade.

“The vast majority of retail salable orders go to wholesalers — more than 90% to a small handful of wholesalers who pay for order flow,” Gensler said. “Furthermore, this segmentation means that institutional investors, such as pension funds and the like, do not directly interact with this order flow. This segmentation, which isolates orders from the retail market, may not benefit as much to the retail public than orders be exposed to order-by-order competition.

Meanwhile, information on which trades get better prices is not always clear. Gensler suggested that more disclosure is needed — especially from brokers, who currently don’t need to disclose as much price quality information as wholesalers and exchanges do in so-called price quality forms. rule 605.

Gensler, in a speech at a Piper Sandler conference, also touched on several other areas he wants to change in financial markets. In particular, he reiterated his view that order flow payment is a conflict of interest and said he asked his staff for a proposal to address this issue.

“Payment flow can skew routing decisions – some major trading companies looking to attract Robinhood’s order flow have told them there is a trade-off between payment order flow and improving prices for customers,” Gensler said.

He also noted that not all brokers pay for order flow, and some with zero commission do – perhaps seeking to address criticism that the PFOF ban would lead to the end of trading without commission.

Gensler also suggested potential changes to the rules limiting tick size to a penny, which are in effect with exchanges and put them at a disadvantage to wholesalers, who can offer prices below a penny. He also suggested potential changes to the National Best Bid and Offer, a system companies use to measure their prices for customers. Odd lots of less than 100 shares are not included in the NBBO, he noted, but now account for 55% of trade in March 2022, up from 15% in 2014. This is the result of an increase in retail trading and rising stock prices.

Robinhood Chief Legal Officer Dan Gallagher slammed potential SEC changes before Gensler spoke on Wednesday, an indicator of much more debate to come on these issues.

The SEC could begin proposing these different rules this fall, according to the Wall Street Journal, and public comment would follow.


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