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July 11, 2018 | Brokers Still Selling Client Orders for Kickbacks and Exchanges Still ‘Selling the Flow’

Danielle Park

Portfolio Manager and President of Venable Park Investment Counsel ( Ms Park is a financial analyst, attorney, finance author and regular guest on North American media. She is also the author of the best-selling myth-busting book "Juggling Dynamite: An insider's wisdom on money management, markets and wealth that lasts," and a popular daily financial blog:

Different sector than social media, but security exchanges (that used to be run like public utilities) have adopted a similar hi-tech, trust-abusing business model that sells customer information to be abused by third parties at the expense of the customer, and without their understanding or consent.

To improve the necessary integrity and stability of public markets, exchanges must return to being run like utilities and be banned from paying rebates to brokers for their clients’ order flow, and from selling that flow to third parties who profit on it.  This is parasitic hoax, posing as free markets.

The race to the bottom on transaction fees continues to cost legitimate participants and would-be-investors heavily.  Fair, transparent, competitive fees paid by investors for fair execution, is the only reasonable course.  Remembering, as always, that when we don’t pay a transparent fee for service, we are the product, not the customer.

The Securities and Exchange Commission unanimously voted back in March on a pilot program that would examine how transaction fees and rebates that stock exchanges use to attract trades impact the market and if they present conflicts of interest between brokers and their customers. IEX Group Inc. CEO Brad Katsuyama discusses the pilot program with Bloomberg’s Erik Schatzker in New York.  Here is a direct video link.

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July 11th, 2018

Posted In: Juggling Dynamite

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