The chairman of the SEC Gary Gensler Just released a video about how 1.5 billion that's billion with a B 1.5 billion dollars is stolen from retail Traders and investors every single year I Haven't watched the video yet I Figured it'd be fun to watch it together and do a little bit of a live react. If you enjoy this type of content, don't forget to the like button and join up with the Moon game by hitting the Subscribe button and with that out of the way, let's rock! Thank you as a really quick FYI This video was posted on Gary Gensler's own Twitter page and if you're looking for the date it was posted on February 21st. more than 90 of retail investors marketable orders are routed to a small group of off exchange wholesalers known as market makers. The lead one is Citadel and the second one is referred to.

Between those two, it's pretty much a duopoly. There are other players, but Citadel Securities and Virtu really control the Lion Share I Think retail investors deserve the full benefit of competition. The annual competitive shortfall could be worth 1.5 billion money that could go into investors. Pockets I Haven't watched this video yet I Want to do the live react with all of you, but my initial instinct is if you know there's a 1.5 billion dollar problem, why aren't you doing something about it? Let's give it a listen.

What do auction houses have to do with the Stock Market office hours with Gary Gensler Auction houses bring buyers and sellers together for sales of items in a competitive way. It could be sales of baseball cards, antique rugs, and other items. If you're selling something, you can often benefit from the transparency and competition of an auction. We see some examples of auctions in our financial markets.

Stock markets, for example, use auctions at the beginning and end of the day. Quick side note: that opening and closing auction. That's actually kind of the importance of where your stock is listed. That's the advantage of that exchange listing it.

So some are listed on the New York Stock Exchange others are listed on the NASDAQ, but yet throughout the day you can trade on either. Well, that's one of the big differences, right? There is the exchange on which the equity is listed. They get control of the opening and closing auction. Just a little bit of a side note: to determine the price, the goal is getting the best out of competition.

Now there are many ways to instill competition in our financial markets. all right through enhancing transparency access, creating a fair playing field. And auctions are just one of those ways. Let's look at the current market to see why it would benefit from greater competition.

Why does it always feel like he's an investor? 10 shares of stock? You might think that your trades benefit from robust competition similar to an auction. Or perhaps that it would have the transparency of a lit Stock Exchange right? Well, actually, it turns out that more than 90 percent of retail investors marketable orders are actually routed to a small group of off-exchange wholesalers operating in What's called the Dark. Market. All right, just for more clarification here, there is lit exchanges you could trade there.

That's the New York Stock Exchange the NASDAQ IEX. There's around 14 ish major ones of those. Then you. You could also go to what's referred to as OTC and that is what he's referring to as the dark markets.

And there's two major things that make up: OTC Training: Also known as dark Markets that is dark Pools also referred to as Ats's that's more of the all like the specific name alternative Training Systems ATS means dark pool. Dark pool is a part of dark Market Training Dark Market Trading AKA OTC That's the umbrella term. It's just literally saying not on lit exchanges anywhere else. The other part of OTC Trading AKA Doc Market Trading that is not dark Pools not Ats's are market makers.

That's retail wholesalers. That is your Citadel Securities That is your virtue. That is actually where most of this training is happening when you're talking about dark Market trading. Dark Market Trading is the large umbrella term and the major amount of trading that's happening there is with market makers, but there is obviously some trading happening on dark Pools.

Just so you know, that doesn't seem to promote the greatest competition or fairness. The idea of conflicts of interest for sure, particularly relevant when it comes to your marketable orders. And that's because there's a sweetness about those retail orders. And let me say why.

You see tips Because they take us to the woods. an investors like you aren't making large trades of tens of thousands of shares or millions of dollars. So these smaller orders that you're making generally don't move the price of the stock market. and thus there's a benefit for those Brokers on the other side, executing to fill your orders I Think the retail public deserves the full benefit of competition for the sweetness of your marketable orders.

and I think it's time to breathe more competition into our Equity Market Here's what's happening. Say there's your favorite company stock under the ticker. XYZ So you like it, like it, like it, and it's ripped a lot and you're ready to sell it. You sell it, and because of the brokerage, you're using the brokerage and a process referred to as Pfof payment for order flow.

They don't send it to a late exchange, they send it to a dark market. and specifically within that dark. Market they are selling it to a market maker. AKA Retail wholesaler.

Let's just say Citadel Security So you're in this stock. XYZ it's going up up. You're ready to sell, you hit the sell button and in this case it ends up selling for ten dollars. But let's say that is the current bid and then someone is willing to ask us.

Currently, let's just say it's spread bison. So it's ten dollars and then ten dollars and one cent. It's that's the highest willing bid and then you have the lowest willing offer. That's how a bid and ask spread works.

This is where market makers make their money is by traversing the spread. What I mean by that is, you might hit the sell button and it's trading 10 by 10.01 and they sell it for 10 and then someone else is coming in there and like, well, I'm willing to buy right now I Think it's going to go even higher. So you just offloaded your shares at ten dollars to the market maker and then they have another order already coming in of someone willing to buy at 1001. So they say thank you, they take yours for 10.

they give it to the other person at 1001 and then in the meantime they pocket that one cent difference. That is a little bit of a rudimentary explanation, but you can understand of if this is happening millions of times a day on thousands of different equities, all those little pennies, they very much add up. That's also probably a good explanation of why last year loans Citadel Securities The world's Major Market Maker at least here in the US made 7 billion dollars. It's what we're trying to accomplish at the Securities and Exchange Commission.

This last December the Commission proposed to require that those marketable orders of individual investors of a certain size be exposed to competition and fair and open auctions. Now, the executing broker may get you a price that's midpoint or better. That would be great, but otherwise they would. When he says midpoint, he's referring to literally the midpoint between the bid and the ask the midpoint in between that spread.

If you get that or better, it's cutting down the spread advantage that market makers are going for have to compete in good old-fashioned auctions. These auctions would include competition from possibly hundreds or thousands of other Market participants to get retail investors orders. According to analysis done by SEC economic staff, the shortfall of lacking some of that competition could be worth one and a half billion. That's crazy money that could go back to your pockets and your portfolio and your future.

Sounds like a win to me. I Agree, it does sound like a win. So why aren't we doing anything about it? If the Chairman of the SEC as of now that is Gary Genzer, at least at the point that I'm filming this and the retail training public that is informed about the situation, all agreed: the current process of payment for order flow, the extreme amount of orders that are being sent to dark markets particularly market makers and not being executed on lead exchange if that is leading to clear conflicts of interest and also transparency issues. This is verbiage from the Chairman of the SEC If he's saying that, that's just not my idea I'm not just a guy filming this with my camera saying hey, I think this I Think this.

The Chairman of the SEC is calling out how this practice leads to conflicts of interest transparency issues. It's just a problem. A 1.5 billion dollar problem per year. I Like what's being said I Like that the problems being identified but it leads to the question of why isn't anything being done I Would love to get your thoughts in a comment below.

Don't forget if you enjoy this content, hit the like button and don't forget to become a goonie by also subscribing. I'll catch you in the next video.