Tag: We The Investors

Citadel Deems Retail Advocacy Group as Conspiracists

May 1, 2023 / Frank Nez

A Citadel spokesperson is deeming retail advocacy group “We The Investors” and founder Dave Lauer as conspiracists.

Many retail investors support the advocacy group, which aims at helping create market transparency for all and encourages regulators to pass proposals that will level the playing field for retail investors.

Nearly 35,000 retail investors have signed a letter to the SEC published by We The Investors requesting improvements to market rules and new disclosures.

The letter is introducing new disclosure in lending transparency, margin transparency, netting transparency, FTD transparency, as well as disclosure of registration, and many other rules that will help level the playing field for retail investors.

We The Investors has held two online meetings since December with SEC Chair Gary Gensler, who took questions directly from retail investors on the proposals, which include requiring most retail stock orders to be sent to auctions to boost competition.

Other proposed rules call for a new standard for brokers to demonstrate they’ve gotten the best execution for clients on transactions, as well as lower trading increments and access fees on exchanges, and stronger disclosure around retail order executions.

But Wall Street, including Ken Griffin’s Citadel is pushing back.

“Baseless Conspiracy Theories”

We The Investors has urged the SEC to ban Payment for Order Flow (PFOF), a practice that Dave Lauer considers unethical.

“The system uses individual investors as products. It doesn’t support them,” says Dave.

The Wall Street Journal says that many brokerages, trading firms and academic researchers say individual investors get a good deal in the current system.

They say payment for order flow has benefited investors by allowing brokers to offer zero-commission trading and to execute orders at better prices than those quoted on public stock exchanges.

Many industry veterans say Mr. Lauer’s criticism is misguided, and they criticize him for peddling what they consider baseless conspiracy theories.

However, in 2004 Citadel said that payment for order flow “creates conflicts of interest and should be banned”, according to an SEC file.

“Citadel Group urges the commission to ban payment for order flow. This practice distorts order routing decisions, is anti-competitive, and creates an obvious and substantial conflict of interest between broker-dealers and their customers, said Citadel in a 2004 SEC filing.

“David Lauer spent nine months as an analyst at Citadel 14 years ago,” a Citadel spokesperson told the Wall Street Journal.

“While he may consider himself an authority on how the equity market functions, his rhetoric is unsupported by data and often veers into conspiracy.”

“The Game is Rigged”, Says Ex-Citadel Data Scientist

While pushback from Wall Street is expected, millions of retail investors have educated themselves in the market well enough to understand what is and what isn’t beneficial to their investments.

Payment for order flow and dark pool trading are just two of the tools retail investors want to ban from the market.

Dark pools suppress a stock’s price from rising, slashing true retail demand in the market by 50%-70% or more — will Wall Street argue that dark pools are good for retail investors too?

Patrick McConlogue, an ex-Citadel Data Scientist said during the ‘meme stock’ frenzy that the stock market is rigged, claiming he helped design it.

“The game is not fair and it never has been. Individual investors, even when operating in a swarm, are destined to lose. How do I know? I helped design the game.”

Patrick says the rules of the game also heavily favor hedge funds, something retail investors have urged SEC Chairman Gary Gensler for years to change.

“I respect many of my colleagues, the problem isn’t the people, it’s the rules of the game which heavily favor the funds.”

You can read Patrick’s full story here.

Citadel may deem retail investors as conspiracists, but this is just a coping mechanism.

I’d love to know what you think — leave your thoughts below.

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35,000 Retail Investors Sign SEC Letter for New Rules

April 24, 2023 / Frank Nez

Nearly 35,000 retail investors have signed a letter to the SEC published by We The Investors requesting improvements to market rules and new disclosures.

We The Investors has given retail investors an organized, professional, and formal stance in the finance world.

For once, Wall Street vs Main Street are going head-to-head like never seen before.

Retail investors have become highly knowledgeable about the stock market and how regulation is primarily tailored to better suit institutional investors over the average investor.

This decade is going to bring forth some of the biggest changes in the stock market.

Here are the latest news and updates.

We The Investors SEC Letter

“Dear Chairman Gensler,

Since the launch of We The Investors in March, 2022, we have had over 100,000 retail investors sign up to support our various efforts to advocate for five basic principles in market reform: transparency, simplicity and fairness, choice and control, best execution and better settlement and clearing.

Our grassroots advocacy campaign has a simple goal – to empower retail investors to represent themselves while advocating for market structure reforms.

Today we write to you to continue this campaign and urge you to address one of the most opaque areas of market structure – the settlement and clearing systems that have problematic disclosures around stock lending, failures to deliver (“FTDs”), margin and netting, and the practices that enable business models predicated on FTDs.

When you discussed naked shorting and FTDs on the Jon Stewart podcast, you agreed that “we need more transparency and better transparency about a really core part of the market [] when somebody sells securities they don’t own.”

The Commission has focused with its recent proposals (10c-1 and 13f-2) on disclosure of stock borrowing and short selling by investment managers, and we applaud and support those efforts.

However, we do not believe that these efforts go far enough, and we would like the SEC to re-examine the disclosures and mechanisms in place in this “core part of the market.”

As such, we write to you requesting the following improvements to market rules and disclosures – a roadmap for change.

Retail Investors Propose New Disclosures from SEC

Nearly 35,000 retail investors have signed an SEC letter proposing new disclosures and rules for market transparency.

Outlined below are the disclosures and rules detailed in the letter.

“First, we believe that there is a comprehensive set of new disclosures that could shed light into this opaque portion of the market:

Lending Transparency: Retail investors have the right to know whether their securities have been lent out, and how much revenue the broker has received.
Margin Transparency: Investors need visibility into the estimated margin per security for Clearing Brokers.
Netting Transparency: Investors need disclosure of gross versus net notional or share count per security to help understand trading dynamics and discern the level of real investment versus intraday trading activity.
FTD Transparency: Failure To Deliver disclosures need to be updated more often, and include more information, including how and when FTDs are remediated, what type of counterparty is responsible for the failure (bucketed into clearing broker, exempt market maker or custodian), and how long the FTDs remained open.‍
Disclosure of Registration: Public companies should be required to disclose directly registered shareholder numbers on all 10-Q and 10-K reports.

Next, we believe that retail brokers must be obligated to give their investors more control over the lending of their securities and how those securities are registered:

NOBO/OBO designations: Brokers should explain to investors the choices they may make as it relates to transparency of share ownership, where shares are recorded in a brokerage account in beneficial format. The default options should always be NOBO (non-objecting beneficial owner). Shielding holdings from investee companies through the use of OBO (objecting beneficial owner) designations should be a right that an investor should opt in to. Brokers should provide the investor’s email address as part of any disclosure of NOBO holdings.
Control of Stock Lending: Investors have the right to decide whether their securities can be lent out to short sellers. Disclosures around account types and the implications therein need to be made simpler, easier to understand, and more explicit in the account creation process.
Control of Registration: Investors should be able to choose whether their shares are to be held in a brokerage account or in direct registration form in the investor’s own name on the company’s share register. Brokers should be required to support the direct registration of shares in an investor’s name.
Investor Communications and Proxy Voting: Investors should be able to receive their communication directly from the company they invest in and not have their shareholding pooled with other clients of the broker, whose interests may not be aligned. Investors should be able to vote directly with the company, and have their voice heard at general or extraordinary shareholder meetings. Their votes should be directly confirmed by the company or its agent.

Retail Investors Demand Change in the Market

“Finally, we urge you to reform the settlement and clearing system to end problematic practices that can distort price discovery and supply/demand dynamics:

End the “Market Maker” Exemption to Reg SHO: As SEC enforcement has shown, so-called “market makers” have abused this exemption to Reg SHO that allows them to sell shares short without a locate. Markets would better reflect actual supply and demand dynamics if all trading firms had to locate shares before selling short. The SEC should further set a goal of a more robust, transparent, electronic locate workflow and standard.
End “Fails as a Business Model”: Too many firms rely on failing to deliver on their short sales to prop up or sustain their business models. This practice must be ended, either by enforcing mandatory buy-ins or through interest charges on failures. This would entail a more comprehensive overhaul of the US settlement system, and one potentially modeled on the European Settlement Discipline Regime.

We urge you to take these actions to improve transparency in markets, shine a light on the most opaque part of our market’s plumbing, to ensure that prices in the market reflect actual supply and demand, and to guarantee that brokers give investors the appropriate level of control and disclosure so they can make the decisions appropriate to their unique, individual circumstances.

We would be happy to meet with you and discuss any of these proposals in more detail.”

You can sign the official letter from We The Investors on their official website.

If you would like to receive more updates and news for the retail community like this, join the newsletter below.

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Franknez.com is the media site that keeps retail investors informed.

You can also follow Frank Nez on Twitter, Instagram, Facebook, or LinkedIn for daily posts.

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‘We The Investors’ Challenges Wall Street on New SEC Proposals

March 11, 2023 / Frank Nez

‘We The Investors’ is taking Wall Street head on which means retail investors from around the world are now being represented in a way like never before for the first time in history.

More than 1,300 letters have been submitted to the SEC supporting rules proposed in December that represent the biggest changes to equities trading in nearly two decades, according to Reuters.

The collective of retail investors have joined ‘We The Investors’ led by Dave Lauer in efforts to combat Wall Street as a legitimate organization that sprouted from the events of the ‘meme stock’ frenzy in 2021.

Halts in AMC, GameStop, and other stocks during at the time angered many investors which led to the exposure of crime and market injustices on social media.

Retail investors have been pushing for market transparency ever since.

But Wall Street, including Ken Griffin’s Citadel is pushing back.

Wall Street, Citadel, Face Organized Retail Investors

The New York Stock Exchange teamed up with retail broker Charles Schwab Corp and market maker Citadel Securities on Monday to ask the U.S. Securities and Exchange Commission to withdraw two recently proposed rules aimed at revamping how stocks trade.

The move represents a coordinated industry push back against what are potentially the most impactful proposals in the SEC’s biggest attempt to reform stock market rules in nearly 20 years.

“We are deeply concerned that the Commission has simultaneously issued multiple far-reaching proposals that would dramatically overhaul current market structure without adequately assessing the cumulative impact on the market or the potential for unintended consequences,” the companies said in an SEC comment letter.

The SEC in December proposed requiring nearly all retail stock orders to be sent to auctions, as well as a new standard for brokers to show they get the best possible executions for their clients’ orders.

The SEC also proposed lower trading increments and access fees on exchanges, and more robust retail order execution disclosures.

And now Citadel, Charles Schwab, and the New York Stock Exchange are fighting against these proposals that will help level the playing field for retail investors.

Payment for order flow has annihilated competition and reserved market maker Citadel Securities the right to buy retail orders from brokers such as Robinhood and TD Ameritrade.

During an interview with SEC Chairman Gary Gensler, the Chairman tells ‘We The Investors‘ that he believes the SEC should have the ‘Best Execution Rule‘, not the self-regulatory organization, FINRA.

We The Investors and SEC Chair Gary Gensler Discuss Equity Market Structure Reforms https://t.co/qNUkiDU4cf
— Dave Lauer (@dlauer) December 16, 2022

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For stock market, business news and updates, join the newsletter to receive weekly market news and notifications straight to your inbox.

Franknez.com is the media site that keeps retail investors informed.

You can also follow Frank Nez on Twitter, Instagram, Facebook, or LinkedIn for daily posts.

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You can now read exclusive FrankNez articles for only $1/mo.

Gain access to EXCLUSIVE FrankNez articles you won’t find here.
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Chairman Gensler Says He Understands Retail’s Frustrations

December 17, 2022 / Frank Nez

Gary Gensler We The Investors — Chairman Gary Gensler talks dark pools, conflicts of interest, and more with *We The Investors*.

In an interview with We The Investors, SEC Chairman Gary Gensler says he understands retail investors’ frustrations.

Hosted and led by Dave Laurer, a We The Investors panel had direct communication for the first time with Gary Gensler, representing the retail investor community as an entirety.

In this article, I break down key moments of the interview where the SEC Chairman answers questions retail investors have been yearning for.

Be sure to share this article within your community.

You can follow me on Twitter where I publish market news and updates daily and keep the retail community informed on the latest market analysis and trends.

Let’s begin.

Gary Genlser on Predatorial Short Selling

Gary Gensler on predatorial short selling.

One of the biggest concerns the retail investor community has had, not just over the past few years since the beginning of the ‘meme stock’ frenzy, but a decade back is that of predatorial short selling practices.

The SEC Chairman says that short selling is a challenging area where the SEC is still working and pursuing focus on.

One of the biggest challenges according to Chairman Gensler is that Wall Street powers will send stacks of reports highlighting rebuttals on proposals aimed at protecting retail investors.

This is primarily because certain proposals aimed to protect retail conflict with Wall Street money.

And because these firms are market participants, like retail investors, these documents must be legally reviewed.

The challenge only grows when Wall Street firms open lawsuits against the SEC when certain proposals become a direct hinderance to the way these companies perform.

Later in the interview, the retail community is strongly urged to fight back by directly addressing issues and concerns to the SEC, similar to Wall Street.

And I think We The Investors has officially opened that door.

But more on that below.

Here are two big proposals the SEC has in the works that aim at protecting retail investors.

T+1 Settlement Cycle

We are currently in a T+2 settlement, which is basically the number of business days it takes for orders to execute.

Faster settlement cycles such as T+1 gives retail investors faster order execution.

The SEC Chairman says about a year ago, the SEC put out a proposal on shortening the clearing cycle to protect market participants from getting locked out of trading, like how they did during the ‘meme stock’ frenzy.

Gensler says, “I’m not legally allowed to pre-judge where we’ll end up in all these things, but I’m really encouraged by the support we have to shortening the settlement cycle to 1-day.”

“I’m encouraged also about a lot of the support we have to bringing greater transparency to short selling.”

Conflicts of Interest Proposal

Gary Gensler also said in the interview with We The Investors that he is very hopeful that the SEC will put out some proposals about the inherit conflicts of interest that go into predictive data analytics that targets certain users with one set of props versus other props.

He’s very well aware about the conflicts of interest in the market, now it’s going to be up to retail investors to get involved and accept these proposals by writing back to the SEC once they have been made available.

Do Dark Pools Suppress the Price of a Stock?

Dave Laurer asked the SEC Chairman if dark pools suppressed the price of stock and whether retail investors could influence the price of a stock if majority of orders traded in the lit exchange.

While there was no direct answer to the suppression of price, the Chairman says that with so much trading happening off-exchange, he doesn’t think it’s a leveled playing field as dark pools give institutions an unfair advantage.

Retail investors as individuals don’t have the power to move the markets, but retail orders combined could have significant price impact.

Having worked in Wall Street for 18 years, Gary Gensler says he understands retail’s frustrations and understands the conflicts.

He is urging retail investors to weigh in heavily on SEC.gov.

The chairman almost empowers retail to fight back by submitting letters and comments to the SEC directly oppose to thinking change will happen merely from social media.

While social media is a great tool to raise awareness, the SEC Chairman urges the retail community to weigh in on the SEC’s website.

Final Words for Retail

Gary Gensler says his term isn’t up until 2026, but he hopes he and his team do right by the American public and are able to do the best they can for everyday investors.

His biggest encouragement for the community is to weigh in so that all commissioners gain broader perspective.

We The Investors, led by Dave Laurer, is opening the door for retail investors to have a respected place in the financial markets.

The interview marks a historic turning point for retail investors and establishes the retail community as a real organization with real ideas to battle fraud and corruption in our financial system.

You can watch the full interview with SEC Chairman Gary Gensler below.