SEC报告解读（下）：GME事件及所引发的监管思考-45正式版

StaffReportonEquityandOptionsMarketStructureConditionsinEarly2021

October14,2021

DISCLAIMER:ThisisareportoftheStaffoftheU.S.SecuritiesandExchangeCommission.Staffreports,InvestorBulletins,andotherstaffdocuments(includingthosecitedherein)representtheviewsofCommissionstaffandarenotarule,regulation,orstatementoftheCommission.The

Commissionhasneitherapprovednordisapprovedthecontentofthesedocumentsand,likeallstaffstatements,theyhavenolegalforceoreffect,donotalteroramendapplicablelaw,andcreatenoneworadditionalobligationsforanyperson.TheCommissionhasexpressednoviewregardingtheanalysis,findings,orconclusionscontainedherein.

TableofContents

1.

Introduction

2

2.

U.S.MarketStructureandSecuritiesRegulatoryFramework

3

2.1

EquitiesandOptionsMarketStructure

3

2.2

OverviewoftheRegulatoryFramework

4

2.3

IndividualInvestorsandRetailBroker-Dealers

6

2.4

OrderExecutionandSegmentationofIndividualInvestorFlow

10

2.5

ClearanceandSettlement

14

3.

GameStop:WhatHappened

15

3.1

TheRun-UptoJanuary2021andIncreasingIndividualInvestorParticipation

15

3.2

GMEEquitiesTrading

17

3.3

ImpactonExchange-TradedFunds

23

3.4

ShortSellingandCoveringShortPositions

24

3.5

ClearingAgencyMarginandCapitalIssues

31

3.6

Broker-DealerReactionsandTradingRestrictions

32

3.7

RoleofOff-ExchangeMarketMakers

35

3.8

AvailableLiquidityforGME

37

3.9

GMEOptionsTrading

40

4.

Conclusions

43

1

Introduction

GameStopCorp(“GameStop”or“GME”)andmultipleotherstocksexperiencedadramaticincreaseintheirsharepriceinJanuary2021asbullishsentimentsofindividualinvestorsfilledsocialmedia.Asthecompanies’sharepricesskyrocketedtonewhighs,increasedattentionfollowed,andtheirsharesbecameknownas“memestocks.”Then,astheendofJanuaryapproached,severalretailbroker-dealerstemporarilyprohibitedcertainactivityinsomeofthesestocksandoptions.

ThisreportofthestaffoftheSecuritiesandExchangeCommission(“SEC”or“Commission”)primarilyexaminestheJanuary2021tradingactivityinGME,themostfamousofmemestocksagainstthebackdropofcontemporaneoustradingactivityinothermemestocks.Becausethemediaattentionsurroundingthememestockepisoderaisedseveralquestionsaboutmarketstructure,thisreportwillbeginwithanoverviewofU.S.equityandoptionsmarketstructureandexplainhowindividualinvestors’ordersaretypicallyhandled.

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Asmoreindividualinvestorsparticipateinthemarkets,asmanydidduringthevolatiletradinginearly2021,itisimportanttounderstandhowtheirordersareexecutedandtheincentivesoftheirbroker-dealerswhenexecutingthoseorders.Inparticular,theabilityofasmallnumberofoff-exchangemarketmakerstotradeprofitablywithretailorderflowhasledthesemarketmakerstonegotiateagreementswithretailbroker-dealerstosecurerightstothisorderflow.Inturn,thispaymentfororderflowcreatesincentiveswithregardtotheendcustomerwhoseorderflowisbeingsold.Someindividualinvestorsmighttrademorefrequentlyascommissionshavefallenorbeeneliminated,whichraisesquestionsabouttheeffectofnovelfeatures(e.g.,digitalengagementpractices)oftheirbroker-dealers.Theexecutionofretailordersbyoff-exchangemarketmakersraisesfurtherquestionsaboutwhetherindividualinvestorsmaystillbesubjecttootherlessconspicuouscostsandconflictsofinterest.Whilethesefeaturesarenotnecessarilythecauseofthememestockvolatility,investorsshouldbemindfulofhowtheirordersarehandled,includingthedifferencebetween“free”and“nocommissions.”

DynamicsrelatedtoshortsellingarealsoanintegralpartoftheGameStopstory.Stocksseenbypartsofthemarketasovervaluedtendtoexhibitsignificantshortinterest,andpriortoJanuary2021,GameStopwasnodifferentinthisrespect.However,someinthemediadirectly

Thisreportusestheterm“individualinvestor”tomeananaturalpersonwhois“self-directed”(i.e.,notactingonarecommendationbyabroker-dealer),incontrastwithprofessionalinvestorsorinstitutionalinvestors.Thetermencompassesanindividualwhotradesfrequentlyorinfrequentlyandinverysmalltolargedollaramounts.Theterm“retailbroker-dealer”referstoabroker-dealerthatcaterstoindividualinvestors.Thisdefinitionof“individualinvestor”differsfromtheConsolidatedAuditTrail(“CAT”)definitionof“individualcustomeraccount,”whichisalsousedinthisreport.Seeinfranote

59.

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linkedtradingactivitytothepresenceofshortinterest,characterizingtradinginGameStopasanactofrebellionintendedtohumbleshort-sellingprofessionalinvestorswhohadallegedlytargetedthestock.Lastly,theepisodehighlightedtherisksthatexistwhiletradesaresettledandraisedconcernsaboutthemechanismsmarketparticipantsusetomanagethoserisks.Specifically,volatilitycombinedwithsettlementrisksledsomefirmstotemporarilyrestricttrading.Wediscussaspectsofequityandoptionsmarketstructurebelow.

U.S.MarketStructureandSecuritiesRegulatoryFramework

2.1EquitiesandOptionsMarketStructure

TounderstandwhattranspiredinJanuary2021,itisnecessarytounderstandthemarketstructurewithinwhichtheeventsoccurred.

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Fromtheperspectiveofindividualinvestors,thelifecycleofastocktradestartswithaninvestorplacinganorderthroughanaccounttheyestablishwithabroker-dealer.

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Thebroker-dealerthenroutestheorderforexecutiontoatradingcenter,suchasanationalsecuritiesexchange,analternativetradingsystem(“ATS”),oranoff-exchangemarketmaker.

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Onceatradingcenterexecutestheorder,thecustomerreceives

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See,e.g.,“StaffReportonAlgorithmicTradinginU.S.CapitalMarkets,”SECStaffreport(August5,2020),SectionsIIandX,availableat:

/files/Algo_Trading_Report_2020.pdf.

Tradingvenuescanhaveawidevarietyofordertypes,buttherearefundamentallytwotypes:limitordersandmarketorders.Limitordersspecifyapriceandwillstayonan

orderbookuntilanoppositeordercomesinthatmeetsorbeatsthatprice.Alternatively,marketordersareintendedtobeexecutedassoonaspossibleatthebestavailableprice.

BothATSsandoff-exchangemarketmakersarealsobroker-dealersregisteredwiththeCommissionundertheSecuritiesExchangeActof1934(“ExchangeAct”).Additionally,thefirsttradingcenterabroker-dealerroutesanordertomaynotexecutetheorderandinsteadtheordermaygetroutedtooneormoreothertradingcenters.

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aconfirmationandthetradeisreportedtoasecuritiesinformationprocessorthatcollects,consolidates,andpublishesthepriceandvolumedatatomarketdatavendorsandothers.Thisprocessorwillpublicizethetradedetails(i.e.,thatthebuyerandsellerbothreportthesamesecurity,price,shares,anddollaramount).Thetradedetailsarealsosenttotheclearingbroker,whoaffirmsthetradebyverifyingthetradedetails.Theclearingbrokermust“settle”anequitytradewithintwodaysofthetradedate(called“T+2”)byofficiallymovingthestockfromtheseller’sbrokeragefirm’saccounttothebuyer’sbrokeragefirm’saccountandmovingthemoneyfromthebuyer’sbrokeragefirmtotheseller’sbrokeragefirm,aprocessfacilitatedbyclearingagenciesregisteredwiththeCommissionundertheExchangeAct.

Optionsmarketstructureisbroadlysimilartoequitiesmarketstructurewithseveralkeydifferences.Specifically,“standardizedlistedoptions”aretradedonlyonanationalsecuritiesexchange,thereareavastlylargernumberofsecuritieslistedandtraded,displayedliquidityisprimarilyderivedfrommarketmakerquotes,andoptionssettleonthenextbusinessdayfollowingthetrade(T+1).Withrespecttothenumberofseriesofoptionsforeachunderlyingsecurity,therearemorethan10,000listedstocksintheNationalMarketSystem(“NMSstocks”)andmorethan1,000,000optionsseries.

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Becauseofthelargenumberofseries,therearelesslikelytobeinvestorlimitordersrestingonanexchange’sorderbookinanyoneseriesatanygiventime,sopricesarecommonlysetbyregisteredmarketmakers’quotes.

2.2OverviewoftheRegulatoryFramework

TheCommission’smissionistoprotectinvestors,maintainfair,orderly,andefficientmarkets,andfacilitatecapitalformation.Incarryingoutitsmission,theCommissionoverseesself-regulatoryorganizations(“SROs”)suchasthenationalsecuritiesexchanges,theclearingagencies,andthenationalsecuritiesassociations(namely,theFinancialIndustryRegulatoryAuthority,or“FINRA”),allofwhomactasregulatorsoftheirbroker-dealermembers.

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The

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Optionsarelistedaccordingtoa“class,”whichrepresentstheunderlyingsecurity(e.g.,ABCstock).Withineachclass,optionsarelistedinseries,whichdenotetheoptionstype(“call”or“put”),thestrikeprice,andexpirationdate.Forexample,“ABCJune$50calls”referstoacalloptiononABCwithastrikepriceof$50(givingthebuyertheright,

butnottheobligation,tobuy100sharesofABCstockat$50ontheexpirationdateinJuneregardlessofthethen-currentpriceofABCstock).Optionsarepriceddifferentlythanstocks,astheyareexpressedasthepremiumonapersharebasis,suchthatanoptionwithaquoteof$2whereoneoptionscontractrepresents100sharesofunderlying

stockwouldcost$200inpremium.

Amongotherthings,theCommissionalsohelpsinvestorsgainaccesstomaterially

completeandaccurateinformationaboutcompaniesandthesecuritiestheyofferandsell;overseesinvestmentcompaniesandinvestmentadvisers;andinvestigatesandbringscivilchargesinfederaldistrictcourtorinadministrativeproceedingsbasedonviolationsofthefederalsecuritieslaws.

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SROsaresubjecttotheExchangeAct.TheExchangeActincludesvariousrules,requirements,andprinciples,suchasthosethatprohibitexchangesfromengaginginunfairdiscriminationandrequirethemtopromotetheprotectionofinvestorsandthepublicinterest,aswellasthosethatrequireSROstofileallproposedrulechangeswiththeCommission.

Broker-dealersgenerallymustregisterwiththeCommissionundertheExchangeActandaresubjecttothefederalsecuritieslawsaswellasrulesof,andoversightby,theSROsofwhichtheyareamember.Generally,broker-dealersthatdealwiththepublicinsecuritiesmustbecomemembersofFINRA.

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Broker-dealersarefurthersubjecttoanumberofregulatoryrequirements,bothfromtheCommissionand,asapplicable,FINRAandexchangesofwhichtheyareamember,includingcustomeraccountopeningobligations,salespracticesobligations,andnetcapitalandotherfinancialresponsibilityrules.Anumberoftheserulesandregulationsimposeobligationswithrespecttothehandlingofcustomerorders.Broker-dealersaresubjecttocertainconductrequirementsincludingthedutyof“bestexecution,”whichgenerallyrequiresabroker-dealertoexecutecustomerordersatthemostfavorabletermsreasonablyavailableunderthecircumstances,generally,thebestreasonablyavailableprice.

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Inaddition,FINRARule5320(commonlyreferredtoasthe“ManningRule”)generallyprohibitsFINRAmembersfromtradingaheadofcustomerorders(e.g.,receivingacustomerordertobuyandthenbuyingforitsownaccountfirstatapricethatwouldsatisfythecustomer’sorder,withoutprovidingthecustomerwiththatpriceorbetter).Rule605andRule606ofRegulationNMSrequirepublicdisclosuresregardingorderflow.Rule605requiresamarketcenter(i.e.,exchanges,ATSs,andoff-exchangemarketmakers)toreportdataonthequalityofexecutionsonitsmarket,whileRule606requiresbroker-dealerstomakepubliclyavailableonaquarterlybasiscertainaggregatedorderroutingdisclosuresforheldorders.

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See,e.g.,Section15(b)(8)oftheExchangeAct,15U.S.C.79o(b)(8)(concerningmembershipinaregisteredsecuritiesassociation).

See“FINRARemindsMemberFirmsofRequirementsConcerningBestExecutionand

PaymentforOrderFlow,”FINRARegulatoryNotice21-23(June23,2021)(statingthat“firmsthatprovidepaymentfororderflowfortheopportunitytointernalizecustomerorderscannotallowsuchpaymentstointerferewiththeirbestexecutionobligations[,]”andthat“inducementssuchaspaymentfororderflowandinternalizationmaynotbe

takenintoaccountinanalyzingmarketquality.”).

Seeinfranote

41

(describingRule606(a)).SeealsoSecuritiesExchangeActRelease

No.84528(November2,2018),83FR58338,58340n.19(November19,2018)(notingthat,typically,a“notheld”orderprovidesthebroker-dealerwithpriceandtimediscretioninhandlingtheorder,whereasabroker-dealermustattempttoexecutea“held”orderimmediately).

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2.3IndividualInvestorsandRetailBroker-Dealers

Individualinvestorsaccessthemarketsthroughaccountsatbroker-dealers.

10

Broker-dealercustomerscanopen“cash”accountsor“margin”accounts.Withacashaccount,thecustomermustpaythefullamountforsecuritiespurchased.Withamarginaccount,thebroker-dealerloanstheinvestormoneywiththesecuritiesintheinvestor’saccountservingascollateral.Individualinvestorsinamarginaccountcanusethismoneytopurchasesecurities,sellsecuritiesshort,orcovertransactionsincasetheiravailablecashfallsbelowzero(i.e.,overdraft).

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Inorderforacustomertotradeoptions,

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broker-dealersmustconductduediligencethatoptionstradingisappropriatefortheindividualcustomer.Theyoftendothisbyrequiring

customerstoobtainspecificapprovaltoopenanoptionsaccount,generallythroughcompletinganapplicationthatasksquestionsaboutthecustomer’sinvestingexperience,financialsituation,andrisktolerance.

13

Dependingonthecustomer’sresponses,thebroker-dealermaylimitthecustomertolowerlevelsofoptionstradingrepresentinglowerdegreesofrisk.

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Retailbroker-dealershaveattractedcustomersbyreducingcommissionsandofferingmoretools,features,functionality,andconveniencetotransact.Someusepromotionalorawardprogramstoattractandretaincustomers,likeofferingafreeshareofstockuponaccount

opening,offeringtieredcreditsforcertainlevelsofdepositsorfortransferringanaccountfrom

10

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See,e.g.,“InvestorBulletin:HowtoOpenaBrokerageAccount,”SECOfficeofInvestorEducationandAdvocacy(June10,2021),availableat

/introduction-investing/general-resources/news-alerts/alerts-

bulletins/investor-bulletins-43.

See,e.g.,“InvestorBulletin:UnderstandingMarginAccounts,SECOfficeofInvestorEducationandAdvocacy”(June10,2021),availableat

/introduction-investing/general-resources/news-alerts/alerts-

bulletins/investor-bulletins-29.

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See,e.g.,“InvestorBulletin:LeveragedInvestingStrategies–KnowtheRisksBeforeUsingTheseAdvancedInvestmentTools,”SECOfficeofInvestorEducationand

Advocacy(June10,2021),availableat

/introduction-

investing/general-resources/news-alerts/alerts-bulletins/investor-bulletins-2.

SeealsoRegulatoryNotice21-15,“FINRARemindsMembersAboutOptionsAccountApproval,SupervisionandMarginRequirements”(April2021).

PursuanttorulesofFINRA,aregisterednationalsecuritiesassociation,broker-dealersarerequiredtomakesuchapprovalsofanycustomerseekingtotradeinoptions,priorto

acceptinganorderfromthatcustomertodoso.SeeFINRARule2360(b)(16)(Options).SeealsoFINRARegulatoryNotice21-15,“FINRARemindsMembersAboutOptionsAccountApproval,SupervisionandMarginRequirements”(April2021).

“InvestorBulletin:OpeninganOptionsAccount,”SECOfficeofInvestorEducationandAdvocacy(March18,2015),availableat

/introduction-

investing/general-resources/news-alerts/alerts-bulletins/investor-bulletins-77.

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anotherbroker-dealer,referralprograms,orpromotionsinvolvingcelebritiesandonlineinfluencers.Someretailbroker-dealershavefocusedondesigningsimpletradingappsthatmakeiteasiertotradefromanywhere.Somehave“social”featuresthatallowcustomerstodiscuss

stocksandtradesanddisplaytheirtradesandportfoliostoothers.Anumberoffeatures,whichbroadlyincludebehavioralprompts,differentialmarketing,game-likefeatures,andotherdesignelementsorfeatures,appeardesignedtoengageindividualinvestors.Thesefeatures,whichhavethepotentialtoleveragelargeamountsofuserdata,raisequestionsabouttheireffectoninvestor

behaviorthattheCommissionexploredinarecentrequestforpubliccomment.

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Somebrokershavesoughttoattractnewcustomersbyofferingtheabilitytopurchasefractionalshares.

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Fractionalsharesgiveinvestorstheabilitytopurchaselessthan1shareofa

stock.

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Fractionalshareprogramsarespecifictoeachbroker-dealer,asstocksdonottradeonexchangesinunitslessthan1share,andtradesmayonlybereportedtoatradereportingfacilityinmultiplesofoneshare.

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Manybrokershaveeliminatedtradingcommissionsandloweredoreliminatedaccountminimums.Whilenotthefirstbroker-dealertoofferzerocommissions,RobinhoodFinancial,LLC(“Robinhood”)attractedconsiderableattentionwhenitlauncheditsapp,allowingusersto

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17

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SeeSecuritiesExchangeActReleaseNo.92766(August27,2021),86FR49067(September1,2021)(FileNo.S7-10-21)(RequestforInformationandCommentson

Broker-DealerandInvestmentAdviserDigitalEngagementPractices,RelatedToolsandMethods,andRegulatoryConsiderationsandPotentialApproaches;InformationandCommentsonInvestmentAdviserUseofTechnologytoDevelopandProvideInvestmentAdvice).

Anumberofprominentstockshavesharepricesthathaveappreciatedtoseveralhundredorevenseveralthousandsofdollarspershare.Whenthathappens,investorswithmodest

accountbalancescanaffordtopurchasefewersharesthanifthestockwaspricedbelow,say,$50pershare.Forexample,aninvestorthathas$500toinvestcouldpurchase10sharesat$50pershare,butcannotaffordevenasinglesharepricedat$1,500.

Broker-dealerfractionalshareprogramstypicallyinvolvethebroker-dealermaintainingaseparateaccountinwhichiteitheraggregatescustomerstogethertoformafullshare(e.g.,onecustomerbuys.25andanotherbuys.75),orusesitsowncapitalto

purchase/sellafullshareandgiveitscustomerthefraction(e.g.,onecustomerbuys.25andthefirmputstheremaining.75intothespecialaccounttosatisfyfuturecustomerfractionalorders).Customersgenerallycannottransferthesefactionalsharestoanotherbroker-dealer.Theseprogramsvarybybroker-dealer,andvotingorproxyrightsdepend

onthebroker-dealer’spolicies.See“InvestorBulletin:FractionalShareInvesting–BuyingaSliceInsteadoftheWholeShare,”SECOfficeofInvestorEducationandAdvocacy(November9,2020),availableat:

/oiea/investor-alerts-

and-bulletins/fractional-share-investing-buying-slice-instead-whole-share.

See“TradeReportingFrequentlyAskedQuestions#101.14,”FINRA,availableat

/filing-reporting/market-transparency-reporting/trade-reporting-faq.

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tradestocksfornocommissionswithnoaccountminimums.

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Otherbroker-dealerssoonfollowedwithappsofferingnocommissionsandnominimums,includingWebullFinancialLLC,

20

andSoFiSecuritiesLLC.

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Bythefallof2019,otherbroker-dealersbegantoannounce

zero-commissiontradingforindividualinvestorcustomers,includingInteractiveBrokersLLC,

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TDAmeritrade,Inc.,

23

E*TradeFinancialCorporation,

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AllyFinancialLLC,

25

CharlesSchwabCorporation,

26

andFidelityInvestmentsInc.

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“StartInvesting.StopPaying.”Robinhood(March12,2015),availableat:

/news/2015/3/11/start-investing-stop-paying.

PressRelease,“WebullFinancialLaunchesComprehensiveCommission-freeStockTradingApp,”

WebullFinancialLLC

(May30,2018),availableat:

/news-releases/webull-financial-launches-comprehensive-

commission-free-stock-trading-app-300656353.html.

PressRelease,“SoFiAnnouncesAvailabilityofSoFiMoneyandInvestProductstoHelpYouGetYourMoneyRight,”SofiSecuritiesLLC(February26,2019),availableat:

/press/sofi-announces-availability-sofi-money-invest-products-help-

get-money-right/.

PressRelease,“InteractiveBrokerstoLaunchIBKRLiteNewservicetoofferzerocommissionsandnofees,”InteractiveBrokersGroup,Inc.(September26,2019),availableat:

/en/index.php?f=45393.

PressRelease,“TheBestJustGotBetter:TDAmeritradeIntroduces$0CommissionsforOnlineStock,ETFandOptionTrades,”TDAmeritradeHoldingCorporation(October1,2019),availableat:

/content/dam/institutional/resources/press-

releases/oct_1_pricing_press_release.pdf.

PressRelease,“#1DigitalBrokerE*TradeAnnounces$0BaseRateCommissionsFor

OnlineStock,ETF,andOptionsTrades,”E*TradeFinancialCorp.(October2,2019),availableat:

/1/19100221100.0/aempros/content/dam/etrade/about-

us/en_US/documents/newsroom/press-releases/2019/5545607436705191.pdf.

PressRelease,“AllyInvestJoinstheZeroCommissionMovement,”AllyFinancialInc.(October4,2019),availableat:

/2019-10-04-Ally-Invest-Joins-the-

Zero-Commissions-Movement.

PressRelease,“InConjunctionWithChuckSchwab’sNewBook“Invested,”SchwabRemovestheFinalPricingBarriertoInvestingOnlinebyEliminatingU.S.Stock,ETF

andOptionsCommissions,”CharlesSchwab&Co.,Inc.(October1,2019),availableat:

/press-releases/press-release/2019/In-Conjunction-

With-Chuck-Schwabs-New-Book-Invested-Schwab-Removes-the-Final-Pricing-Barrier-

to-Investing-Online-by-Eliminating-U.S.-Stock-ETF-and-Options-

Commissions/default.aspx.

PressRelease,“FidelityBecomesTheOnlyFirmThatOffersZeroCommissionOnline

Trading,AutomaticDefaultToHigherYieldingCashOptionForNewAccountsAndLeadingTradeExecution,”FidelityInvestments(October10,2019),availableat:

8

Thoughretailbroker-dealershavereducedcommissions,somehavemaintainedor

increasedothersourcesofrevenue,suchas:(1)paymentfororderflow;(2)advisoryservicesor

managedaccountsfrombroker-dealersthatareduallyregisteredasinvestmentadvisersorfromaffiliatedinvestmentadvisers;(3)interestearnedonmarginloansandcashdeposits;(4)incomegeneratedfromsecuritieslending;and(5)feesfromadditionalservices.RecentCommissionenforcementactionshavehighlightedsomeoftheconflictsfacedbybroker-dealers.

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Somebroker-dealersreportthatyoungerinvestorsandsmalleraccountshavebeennotablesourcesofnewaccountopenings.Forexample,CharlesSchwabindicatedthatindividualinvestorcustomersage40andbelow,withaccountbalancesbelow$100,000,are

drivingagreaterpercentageoftradingvolumethaninpriorperiods.

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Robinhoodreportedthatitsaveragecustomeris31yearsoldandhasamedianaccountbalanceof$240.

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ApexClearing

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/app/literature/press-release/9896568/fidelity-

becomes-the-only-firm-that-offers-zero-commission-online-trading-automatic-default-to-

higher-yielding-cash-opt.html#:~:text=Insights-

,Fidelity%20Becomes%20the%20Only%20Firm%20that%20Offers%20Zero%20Commi

ssion%20Online,to%20Investors%20of%20all%20Types.

See,e.g.,IntheMatterofRobinhoodFinancial,LLC,“OrderInstitutingAdministrativeandCease-and-DesistProceedingsPursuanttoSection8AoftheSecuritiesActof1933andSection15(b)oftheSecuritiesExchangeActof1934,MakingFindings,and

ImposingRemedialSanctionsandaCease-and-DesistOrder,”SecuritiesExchangeActReleaseNo.90694(December17,2020)(“RobinhoodOrder”)(settledorder),availableat:

/litigation/admin/2020/33-10906.pdf

(discussingthetrade-offbetweenpaymentfororderflowandpriceimprovementandhowRobinhoodtook

approximatelya20/80splitofthevaluebetweenpriceimprovementandpaymentfororderflow,whichwasasubstantiallyhigherpercentagetoRobinhoodthanthetypical80/20ratetheprincipaltradingfirmspaidtootherretailbroker-dealers);andIntheMatterofCantella&Co.,Inc.,“OrderInstitutingAdministrativeandCease-and-Desist

Proceedings,PursuanttoSection15(b)oftheSecuritiesExchangeActof1934andSections203(e)and203(k)oftheInvestmentAdvisersActof1940,MakingFindings,andImposingRemedialSanctionsandaCease-and-DesistOrder,”SecuritiesExchangeActReleaseNo.92809(August30,2021)(settledorder),availableat:

/litigation/admin/2021/34-92809.pdf

(discussingrevenuesharingpaymentsinconnectionwithcashsweepproducts).

See,e.g.,PastCFOCommentary,CharlesSchwab&Co.(March12,2021),availableat:

/cfo-commentary/mar-2021.

See,e.g.,“Young,confident,digitallyconnected-meetAmerica'snewdaytraders,”Reuters(February2,2021),availableat:

/article/us-retail-

trading-investors-age/young-confident-digitally-connected-meet-americas-new-day-

traders-idUSKBN2A21GW;

andTestimonyofVladimirTenev,Co-FounderandCEOof

RobinhoodMarkets,Inc.,atSec.IV,HearingBeforetheU.S.HouseCommitteeon

FinancialServices(February18,2021),availableat:

9

Corporation,abroker-dealerthatprovidesservicestootherbroker-dealers,hasindicatedthattheapproximately6millionaccountsitopenedin2020representa137%increasefromtheyearbefore,withabout1millionofthoseaccountsbelongingtoinvestorswithanaverageageof

19.

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2.4OrderExecutionandSegmentationofIndividualInvestorFlow

Amyriadofmarketparticipantsandtradingvenuesfacilitatetheexecutionofequityandoptionsorders.Whilecustomerssetthetermsoftheirorders,theretailbroker-dealergenerallycontrolswheretoroutetheorderforexecution,subjecttoadutyof“bestexecution,”discussedabove.

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