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There’s more than one way to rid oneself of something that’s bothering you. In this week of mawkish monarchist melancholy, we turn to that august and totally necessary institution, the British royal family, for instruction. When faced with one holding a better claim to the crown you covet, you could rid yourself of it quickly by having him smothered to death in his sleep, as Richard III (allegedly) did. But then you’re liable to be remembered as one of history’s great monsters. Or you could take the approach of Henry IV vis-à-vis the wicked and unlamented except by weirdos Richard III’s namesake, Richard II, and have him locked up and starved to death so that you can’t be said to have killed him, and enjoy credit for stabilizing the monarchy and giving a good kicking to the Welsh.

When it comes to the controversial practice of payment for order flow, by which the likes of Citadel Securities and Virtu Financial pay handsomely to underwrite the “free trading” offered by Schwab or TD or, say, Robinhood by those firms, in the form of “rebates” that make up 80% of the money earned by, just taking a random example, Robinhood, Securities and Exchange Commission Chairman Gary Gensler—as expected—is going with the latter, and like Henry IV before him expects them to be grateful.

After taking a hard line for months, senior SEC officials have signaled in recent meetings with executives that a ban is no longer on the table, the people said, asking not to be named discussing private conversations.

Not that this is necessarily much to celebrate for beneficiaries of the same, as the market quickly realized.

The SEC is considering a move to lower access fees that exchanges charge brokerages to execute trades for some stocks, which could push more trading onto the exchanges, the people said.

The agency also may propose changes that could affect the complicated system of rebates that exchange operators use to lure trading volume, they said. Additionally, the regulator is weighing a plan to force brokers to disclose more about how much trading with them costs compared with benchmarks, a metric known as price improvement, said the people.

The SEC may also seek to clarify requirements for brokerages to provide “best execution” for stock orders, according to the people….

Even without a ban, taken together, the changes could make payment for order flow less profitable.

Shares of Robinhood fell 2.7% on the day after being up more than 11% earlier in the session…. The company’s stock is down more than 40% year to date as the brokerage firm has seen user growth reverse after rapidly expanding during 2020 and 2021.

SEC Set to Let Wall Street Keep Payment-for-Order-Flow Deals [Bloomberg]
Robinhood jumps, then fades after report that SEC will not ban payment for order flow [CNBC]

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