While there is no silver bullet to fixing markets, we believe that a holistic approach can solve many problems. The SEC needs to take action to change the current market structure, rejuvenate the price discovery process, incentivize diversity and competition, and simplify our markets. Included in this, we need regulatory intervention to repair a system that results in inferior execution quality for retail and institutional investors, and that has damaged markets and widened spreads for all participants. We are writing to urge you to address PFOF and the disparities in market structure that lead to excessive off-exchange trading as a top priority, and propose a rule that will truly reform our markets, not simply result in more disclosure. The segmentation of retail order flow away from lit markets means less competition and materially wider spreads as exchange toxicity increases. PFOF creates an intractable conflict-of-interest for brokers whose financial incentives are placed at odds with their duty of best execution. These companies face little competition and amass greater market power, as two of these firms are responsible for a huge share of trading, both on-exchange and off. Gaps created by the lack of meaningful competition, transparency and simplicity have resulted in billions of dollars in annual Payment for Order Flow (PFOF) made from high-speed trading firms to brokers, while these firms generate multiples of this in revenue. But as more people earnestly participate in the markets than ever before, the opacity and complexity of markets has left them concerned that: markets are not adequately providing price discovery that too much power is concentrated in too few firms and that they cannot trust such a complex system that lacks appropriate transparency. In the last 18 months alone, 25 million new investors joined the stock market, and at their peak, retail investors made up more than 25% of the U.S.
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