The demise of maker/taker ? Cboe blasts 'draconian' plan to test banning stock exchange rebates NEW YORK (Reuters) - A plan by U.S. regulators to test banning the rebates stock exchanges pay to brokers that provide liquidity, in an effort to reduce potential conflicts of interest, will ultimately harm investors, the president of exchange operator Cboe Global Markets said on Wednesday. The U.S. Securities and Exchange Commision (SEC) in March said it planned to test the effects of lowering stock exchange fees and rebates following widespread criticism of the current pricing system. Critics, including several large asset managers, say the pricing regime creates conflicts of interest by giving incentives for brokers to send customers’ orders to the exchanges that pay the highest rebates rather than to exchanges that would obtain the best result for the end clients. The SEC’s pilot program would force exchanges to lower the fees they charge for matching buy and sell orders and the size of rebates they pay out, allowing the regulator to analyze whether the current system distorts traders’ decisions about where they send orders. In some cases, rebates would be banned altogether under the proposal, which is not yet final. But there are brokers that trade only on their own behalf, “making markets” by providing both buy and sell quotes for others to trade against in an unconflicted manner, and exchanges use rebates as a way to compensate them. “I find it unacceptable that the SEC is going to say we can’t enter into that relationship to support stocks,” said Concannon. Some of the exchange-traded funds listed by Cboe, which is the No. 2 U.S. stock exchange operator, behind Intercontinental Exchange Inc’s NYSE unit, need market maker support in order to maintain a tight spread, he said. Without rebates to compensate the market makers, the spreads will widen out and investors will have to pay more to buy stocks, he added. “So I have a fundamental problem with that, that we are going to, in the interest of potential conflicts of interest, take money out of investors’ pockets.” Currently, the fees exchanges can charge for trades they execute are capped at 30 cents per 100 shares. Rebates, which not all exchanges pay, are generally in line with the fee cap.
I read this yesterday, such bs. Taking money out of investors pockets? Yeah right. More like taking the candy away from the biggest customer, high frequency traders.
What they should ban is selling of orderflow by brokers if they REALLY want to eliminate conflict of interest and make sure the rebates REALLY flow into us retail investors' pockets. Seriously we retail investors are really not getting that much rebates under the current system. Brokers shouldn't be allowed to sell orderflow and pocket the profit; that's like receiving kickbacks and is in direct violation of fiduciary duties owed to their clients and that is the source of the conflict of interest. Brokers' job is to direct clients' orders according to clients' direction and wishes in the best way they can and earn commission from the clients. Clients should be the only person that pays the commissions. But ever since WHEN do they really look after the interests of retail investors? We are ALWAYS the ones at the bottom of the food chain, just happy to make 1 cent out of every dollar.
No they can have rebates to attract orderflow for competition but us retail investors should be the one benefitting from that and right now we are not; our cut is being taken by the brokers and brokers are just passing to us whatever the morsel that's left over.
Not really following your line of thinking. How are brokers cutting off retail investors from getting rebates?
Disclosures IB's Tiered commission models are not intended to be a direct pass-through of exchange and third-party fees and rebates. Costs passed on to clients in IB’s Tiered commission schedule may be greater than the costs paid by IB to the relevant exchange, regulator, clearinghouse or third party. For example, IB may receive volume discounts that are not passed on to clients. Likewise, rebates passed on to clients by IB may be less than the rebates IB receives from the relevant market. For example, IB may receive enhanced rebate payments for exceeding volume thresholds on particular markets, but typically will not pass these enhancements directly to clients.
Tiered Transparent Volume-Tiered Pricing In cases where an exchange provides a rebate, we pass some or all of the savings directly back to you. https://interactivebrokers.com/en/index.php?f=1590&p=stocks