Today brings some VERY exciting news to share with the community regarding retail investor rights! The time and effort that has gone on behind the scenes to make this happen cannot be understated. But I'd like to share a disclaimer first for the sake of transparency!

As you may know, for the last couple of months I have been consulting with u/dlauer and the awesome team at Urvin Finance regarding community development. I won't get into the details of the project because as exciting as it is, that's not the topic of discussion here and this is in no way an advertisement for that project. The Advocacy discussed here is an entirely different endeavor with a different mission statement, albeit still under the Urvin umbrella. Here's some more information on how We the Investors operates.

Today our community has been invited to be part of a groundbreaking conversation happening with the SEC. We have been invited to submit questions/public comments directly to Gary Gensler himself via We The Investors. (internal screaming)

This post is part of a wider discussion across multiple subreddits. This is not a solicitation for anything besides comment directly to the SEC. There is no fundraising or for-profit element to this post nor the advocacy behind it.

This is truly an unprecedented opportunity in the almost two years it’s been since the sneeze, and it’s thanks to the vigilant members of this community and the advocacy efforts of the We The Investors team. With recent crackdowns on FTX and even Ken Griffin making headlines, the SEC seems more poised than ever to hear what retail has to say about what changes need to be made to create a more fair market for all.

Here's the announcement from Dave Lauer!

_____________________________________________________________________

Today the SEC proposed the most significant changes to US market structure since Regulation NMS was passed, in 2005. These proposals incorporate many of the ideas that we - We The Investors - presented to the SEC earlier - and repeatedly - this year. We The Investors launched in March 2022, and our first effort was a sign-on letter urging Chair Gensler to focus on PFOF and excessive off-exchange trading. And I’m proud to say that we have had a significant impact on the SEC’s actions - through our dialogue, our proposals, and our presence. These rule proposals are the culmination of those efforts. But these proposals are only the beginning. You can monitor this site or submit your email to stay on top of everything we’re doing.

Over the coming weeks, We The Investors plans to:

1. Read more than 1,600 pages of rule proposals. Yikes!
2. Write up summaries of the rule proposals with critical elements that we believe retail investors should be paying attention to.
3. Lead a comment letter campaign to ensure that our voices are not drowned out by conflicted industry firms. This will include writing up comment letters that you can use as a template, to either file in their entirety or to write your own.
4. Engage directly with you to answer any questions and discuss ways of getting involved in our effort to fight against the firms that will do everything possible to prevent these rules from being enacted.
5. Engage with the SEC Chair and Commissioners to bring your questions directly to them, and ensure that we are all being heard.
6. Plan a roundtable with industry experts to get their thoughts and opinions on both the proposals and our ideas for improvements or alternatives.
7. And, continue to promote the sign-on letter for our second effort, focused on FTDs, settlement/clearing, DRS and other issues (we’ve extended the deadline to sign, given the need to focus on the new rule proposals).

So, to kick things off - and I can barely believe I’m writing these words - we’ll be hosting a Twitter Space call with Gary Gensler, this Friday, December 16th, at 2pm ET. The call will explicitly and exclusively focus on the rules proposals announced today. I know there are other issues and questions many of you - and I - would like to ask. We will have the opportunity to ask those in the future, but for this week we are focused on the most significant changes to market structure in 17 years. And, as part of that, we want to include at least one question from this community. So please put them in the comments below and we’ll ask as many as we’re able to. We’ll try to put a Reddit Talk together at some point in the future too.

The new proposed rules are split up into four proposals. At a high-level:

1. Changes to Rule 605 that will modernize execution quality disclosures, and extend those disclosures to retail brokers. Brokers will finally have to publish standardized execution quality metrics that we can use to compare how good of a job they’re doing at executing orders, and what kind of execution quality they’re getting from their counterparties.
2. Significant changes to tick sizes, access fee caps and transparency for better priced orders. This is a somewhat complicated part of the rules that will likely have a very significant impact on order routing and execution. The most important part of this is the tick size changes. Today, internalizers have a regulatory advantage over exchanges - they can execute orders at any pricing increment - that’s why we see so many 1 mil price improvement trades and prices that go out to 4 decimal places. These changes would end that practice and level the playing field. It will mean that retail investors have the opportunity to get the same level of price improvement on-exchange, and change the incentives for retail brokers. Dropping the access fee cap (the fee that exchanges can charge for liquidity-taking orders) to 5-10 mils depending on tick size, will also make it less costly for brokers to route orders to exchanges, making them more competitive.
3. The proposal to enhance order competition would effectively end internalization and wholesaling as we know it, although it wouldn’t end it completely. They’re basically saying that from now on, when a retail broker gets an order, unless it’s executed at the midpoint, that order has to be sent to an auction facility (it can be on-exchange or off, but the bar for running one off-exchange is very high) where anyone can compete to fill the order. Only if the auction fails can the order be executed by an internalizer. We The Investors prefers a simpler approach known as the trade-at rule to the added complexity of the auction approach, but this is an improvement over the current system. I know one of the most important things to this community is knowing that your trades impact the NBBO and execute on-exchange, and this would go a long way to making that happen.
4. Finally, Regulation Best Execution would establish a best execution standard (the SEC does not have one - only FINRA does), and this standard would hold brokers that engage in “conflicted transactions for or with a retail customer” to a higher standard. In our opinion this doesn’t go far enough: there should be an even stronger standard for these conflicted brokers that recognizes payment for order flow is not compatible with best execution and they should be held to an order-by-order standard.

As I mentioned, over the coming weeks, we will be reading the more than 1,600 pages(!) of these new rules proposals, summarizing them, and putting together comment letter proposals (much like the short sale disclosure comment letter we did a month or so back). And your engagement with us and the SEC on these issues is critical to maintain pressure on and momentum towards market reform. We also recognize that the proposals may not (read: don’t) address all of your - or our - concerns with market structure, and that more is necessary. This is exactly why it’s important to read our second sign-on letter, and sign it if you agree with it.

However, in this moment, we have a unique opportunity to engage directly with Gary Gensler, this Friday. So please drop your questions for him on these new rules below. The support and focus this community brings to these critical and timely issues has - and will continue to make - all the difference. A sincere - thank you.

#WeTheInvestors

More information can be found at: https://www.urvin.finance/advocacy/equity-market-structure-reforms

https://preview.redd.it/9rbu2cu80w5a1.png?width=1545&format=png&auto=webp&s=21953238e759663c0206bec6517b0890ddc4fdc2