Just Politics

[janice shell]

From SEC Commissioner Hester Pierce:

Many retail investors avail themselves of commission-free trading. Most broker-dealers that offer this benefit to customers offset it with payments from market makers in exchange for the opportunity to interact with retail order flow. On balance, this practice likely has benefited retail investors, as it has reduced the cost of making a trade and often results in a small improvement of their execution price over the official national best bid or offer. At the same time, critics are correct when they point out the potential for conflicts of interest on the part of the broker, who may be tempted to send trades to a market-maker who offers worse execution pricing (which hurts the investor) but better payment for order flow (which benefits the broker). The way to address this potential conflict, though, is not to ban the practice—which would eliminate a potential conflict at the cost of a likely increase in costs to the investor—but to require better disclosure.[33] As the cost of data processing, presentation, and delivery continues to plummet, our priority should be to leverage technology to ensure that investors receive accurate disclosures about these practices and their effect on execution quality.

https://www.sec.gov/news/speech/peirce-atomic-trading-2021-02-22?utm_medium=email&utm_source=govdelivery