Rut roast spaghettios not the best time to be a market maker, a retail wholesaler, an internalizer whatever you want to call it. First of all, you probably know that the sec chairman, gary gensler, has already been outspoken against payment for order flow, calling it conflicts of interest. Maybe not getting the best execution price well now it gets a little bit more complicated because some of these clearing brokers, which i'll be getting into they're, actually kind of front running the process and saying hey, we don't even know if it's going to be illegal or If it'll stay legal, we don't know a big drug, but regardless we're going to come up with a system that might be better for retail, it might get rid of this whole pfoff thing anyway. I want to quickly go over it because, as a retail trader, this stuff impacts.

You impacts me with every single trade that we make here's what i'm talking about. The brokerage industry looks for alternatives to payment for order flow amid sec's threatened crackdown. This is the exact headline the likes of the duopoly of citadel securities virtue. Basically, market makers do not want to be reading the clearing firm powering, sofi, weeble and other fintechs has been quietly building a marketplace for matching customer orders.

They are referring to apex clearing, which is basically a clearing brokerage that is used by many brokers that have not yet hit the economy of scale. So previously robin hood did use it, and then it gets big enough that it brings the clearing in-house. But right now actually being used on so fine weeble the auction process. As the ceo of apex clearing describes, it would lit exchanges compete directly with market makers like citadel securities and virtue aka.

The duopoly of market makers that do not want to compete directly. It creates more competition which will translate into better prices exactly what you want to hear. The big winner is the retail investor. Another thing you want to hear: we've heard this stuff before and now the golden question is: is that what they actually mean? Is it going to be executed properly? Are they being intellectually dishonest? Obviously we'll find out.

Hindsight is 2020, but let's see what they're actually referring to the brokerage industry is exploring alternatives to payment for order flow. As the sec chair, gary gensler takes aim at the practice ever since may of 2021 gary gensler, maybe it's just lip service, but he's been taking the side of retail, at least in what he's been saying. Basically saying: hey, there are conflicts of interest. We don't know if the users of these applications, these brokerages, are getting the best fill and it's something that should be looked into.

Sec chairman gary gensler proposed changing rules that govern how wall street handles retail trades. The top securities regulator said his plan would require firms to compete directly to execute trades from retail investors. Gensler is also looking for more disclosures. Around fees and data.

The sec chair has been critical of potential conflicts of interest and complained of power being concentrated among select market makers. Once again, i'm fully aware this is exactly what we're saying. The thing we're saying is the exact same thing. The chairman of the sec is saying it seems like we're all on the same side, unfortunately nothing's being done at least not yet.

I do hold a little bit of faith, but let's see how it all plays out so anyway, if you're new to this - and you don't know what payment for order flow, is it's the practice of you being on a brokerage and when you buy or sell the Order is not going to a lid exchange like the new york stock exchange, nasdaq iex. Instead, it gets internalized by a market maker. They take the other side of the trade and basically their algorithms are very fancy very good and they end up shaving off a portion of a penny or maybe a penny on every s. Trade they're basically playing the spread, and they do this over the millions and millions of shares being traded a day and end up making billions of dollars at the end of the year.

There's a new concept in town being built by apex, while the marketplace technically called an alternative trading system, is built and ready to go. It has yet to launch and could require sec approval. But if approved an auction like this may preemptively solve some of the agencies. Complaints about how the security industry operates behind the scenes.

This is one of those things that, once again, it sounds really good, but the devil's in the detail. How is it actually gon na be playing out in real time? What is the competition going to look like? What's the auction going to look like it all comes down to its actual utility and not just how it sounds in this article now that the outline was presented by gensler, there could be innovation in front of it that could get him to where he wants to Be without any formal rule making, while still a variation of pf, a marketplace like this one apex is building, may shrink the profits of wholesale market makers. So this isn't necessarily going to lit exchanges, which i still personally believe is best. I want that to be explicitly clear.

I think everyone should compete in the open, lit market. This potentially is just a stepping stone there. I'm not in any way saying that this auction in an ats is somehow better, but it does seem to be at least an improvement upon the current system. Now, obviously, they're going to be are some people who want to fight against it, such as robinhood, robin hood's? Chief legal officer dan gallagher, a former sec commissioner, argued that things stand.

Retail traders have never had it so good gallagher pointed to fast execution, zero commissions and zero account minimums as reasons to keep the status quo. How dangerous of a concept is that hey things are fine, so there's literally no reason for improvement. Why would we improve market structure, market technology or technology in general when things are a-okay? It is a really good climate for retail to go in and muck up with it. Right now to me is a little worrisome gallagher shut up to muck about who? What stupid pr comment is that if we muck it up dude what that is so so dumb, you were literally just saying what your pr team told you to say, because you need to say things that are beneficial to robinhood no person who truly understands the market, Especially you being a former sec, commissioner, would possibly argue we should stifle innovation because we're messing with status quo so stupid for traders, though, an auction setup with more competition could result in incrementally better prices, while it might look minuscule around one cent for some trades, it Eventually adds up, if you do this over and over again and you're, giving a 10 better execution that goes back to the retail trader, it's better execution on both the buy and sell side, so more money in their pockets.

This can make a material impact and change to the positive for the market structure, and on top of it, it gets way from the conflicts of interest. That's the biggest thing i want to drive home is: are we getting the best deal from the broker when they're trying to make a profit by selling our order flow to one player? Instead, it kind of opens it up for the broker actually having our back, rather than mostly caring about their own bottom line. Overall, these are my thoughts. I would love to get your thoughts and a comment below and i'll catch you in the next video peace out.