Matt Levine wrote in some detail about this today.
SEC set to propose rules that would squeeze stock-market middlemen
11–20 of 141 posts
Re: SEC set to propose rules that would squeeze stock-market middlemen
#12> Requiring such auctions would be a big change. The SEC says brokers send more than 90% of marketable orders to wholesalers. Unlike exchanges, which display price quotes publicly and allow a variety of market players to attempt to fill orders, wholesalers trade directly against the incoming retail flow, an arrangement that effectively prevents other market players such as institutional investors from interacting with individual investors’ orders.
Sounds like a sensible change to me.
Re: SEC set to propose rules that would squeeze stock-market middlemen
#13> Requiring such auctions would be a big change. The SEC says brokers send more than 90% of marketable orders to wholesalers. Unlike exchanges, which display price quotes publicly and allow a variety of market players to attempt to fill orders, wholesalers trade directly against the incoming retail flow, an arrangement that effectively prevents other market players such as institutional investors from interacting wit…
Levine points out that it's not clear that the change --- brief order-by-order auctions to beat the wholesaler price (which is in turn at least as good as the public market) --- will actually improve outcomes for retail investors; there's a paper:
https://deliverypdf.ssrn.com/delivery.php?ID=285088095002029...
Re: SEC set to propose rules that would squeeze stock-market middlemen
#14Wonder how Robinhood is going to survive a potential dilution of payments for orderflow if these proposals become reality.
I thought the real value of Robinhood was that it was a substantial source of information about retail traders for its parent company.
Re: SEC set to propose rules that would squeeze stock-market middlemen
#15Wonder how Robinhood is going to survive a potential dilution of payments for orderflow if these proposals become reality.
I thought the real value of Robinhood was that it was a substantial source of information about retail traders for its parent company.
Robinhood doesn't have a parent company?
Re: SEC set to propose rules that would squeeze stock-market middlemen
#16The first thing I did was open the article and search for PFOF (Payment for Order Flow).
> This proposal would address a controversial practice called payment for order flow, in which some brokers collect rebates for sending customers’ orders to wholesalers. Mr. Gensler has called the practice a conflict of interest and, in past statements, left open the possibility of banning it. The SEC’s best-execution proposal doesn’t go that far. But it imposes additional obligations on brokers that engage in payment for order flow to help ensure that customers are getting a good deal.
Shame. They’re skimming money straight off the top. Perhaps I should withhold judgment but I suspect they’re banking on the idea that Joe Schmoe, who downloaded an app to gamble with his future, isn’t going to seek out this financial disclosure data. I have a friend who can rattle off everything there is to know about option spreads and general technical analysis drivel. He initially didn’t believe me when I told him about PFOF.
Re: SEC set to propose rules that would squeeze stock-market middlemen
#17The first thing I did was open the article and search for PFOF (Payment for Order Flow). > This proposal would address a controversial practice called payment for order flow, in which some brokers collect rebates for sending customers’ orders to wholesalers. Mr. Gensler has called the practice a conflict of interest and, in past statements, left open the possibility of banning it. The SEC’s best-execution proposal do…
Who's skimming off money where now?
Re: SEC set to propose rules that would squeeze stock-market middlemen
#18Wonder how Robinhood is going to survive a potential dilution of payments for orderflow if these proposals become reality.
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Re: SEC set to propose rules that would squeeze stock-market middlemen
#19Earlier quoted context omitted.
I thought the real value of Robinhood was that it was a substantial source of information about retail traders for its parent company.
Robinhood doesn't have a parent company?
I think what was meant is "Robinhood the app's parent company, also named Robinhood"?
Re: SEC set to propose rules that would squeeze stock-market middlemen
#20The first thing I did was open the article and search for PFOF (Payment for Order Flow). > This proposal would address a controversial practice called payment for order flow, in which some brokers collect rebates for sending customers’ orders to wholesalers. Mr. Gensler has called the practice a conflict of interest and, in past statements, left open the possibility of banning it. The SEC’s best-execution proposal do…
Who's skimming off money where now?
Institutional investors. I can’t explain it better than Matt Levine’s article. It’s well worth the read, and it links directly to the SEC proposal if you’d like to read deeper from there.
After reading the article, my take is less harsh. It is really bizarre to me why instead of outright banning it, they just want to make it a really bad deal to do so. But if it works, great! We’ll see.