5/30/2023 0 Comments Trade mania 3![]() ![]() Particularly, instead of the wholesaler executing the deal itself, under the rule the wholesaler must first send the trade to a “qualified auction” operated by an “open competition trading center” accessible to a broader market, allowing for and encouraging a more competitive market. The Order Competition Rule, however, proposes to alter this process (albeit with some exceptions, discussed below) in a big way. Importantly, those small fees paid to the retail broker-deals under that fourth point add up and can make up a large portion of such broker-dealers’ revenue, and further, the market for executing the trades is effectively closed off and managed solely by the wholesaler. Robinhood, or E-Trade) (2) the broker-dealer then sends the trade to what’s known as a wholesaler, who actively quotes two-sided markets in a particular security, for the retail broker-dealers (3) the wholesalers profit off the difference between the individual trader’s proposed price and the price the wholesaler actually makes the trade for and (4) the wholesaler pays to the retail broker-dealers a small fee for giving it the right to make the trade. To set the stage, most retail trading right now (according to the SEC, more than 90 percent of it looks like this: (1) an individual makes a trade, often through a retail broker-dealer ( e.g. It is believed this rule derived from the “Meme Stock” mania that occurred last year, where retail investors invested (and, at times lost) millions of dollars into companies like GameStop Corp. The Order Competition Rule would “prohibit a restricted competition trading center from internally executing certain orders of individual investors at a price unless the orders are first exposed to competition at that price in a qualified auction operated by an open competition trading center.” As the name of the rule suggests, at the heart of this proposal is encouraging greater competition for such individual retail investor’s orders on the national markets, thereby resulting in such investors getting better prices for their trades. This article sheds light on that proposed rule, the “Order Competition Rule.” Although the affirmative vote opens the proposed rules to public comment until at least March 31, 2023, before they can be adopted and finalized, meaning the proposed rules are just that-proposals-one in particular sheds light on the SEC’s desire to protect the public from what the SEC sees as unfair advantages to certain trading firms. ![]() ![]() stock-market rules, perhaps the biggest changes to such rules in nearly 20 years. Securities and Exchange Commission (the “SEC”) affirmatively voted to advance some major changes to U.S. ![]()
0 Comments
Leave a Reply. |