Welcome back to the channel everyone today, i want to talk about how the sec needs to ban payment for order flow and to ban dark pools, and actually this article comes from a former chair of the us fdic. So stay tuned and let's make some money. But before i dive into the video, i just want to give a massive shout out to the 4 700 of you that have currently ding that notification bell, because you guys are always the first to watch a new video as soon as it's released. So guys be sure to drop a like down below subscribe to the channel and ding that notification bell, if you haven't already so that you don't miss another video.

Just like this one, and now i want to dive straight in with the key information, so the sec needs to find a way to curb payment for order flow. It's not clear whether payment for order flow, reduces costs for retail investors or simply makes their costs less transparent. Now this article is actually even published by the financial times. The ft is a very reputable media source and are typically very, very unbiased as well, and also the writer is a former chair of the us federal deposit insurance corporation, the fdic.

You know the same people that regulate those swaps on the open market or in the otc markets. Securities and exchange commission chair gary gensler has cast a long needed spotlight on the practice of brokers, selling their retail orders to makers of markets outside of regulated public exchanges. Typically, these are dark pools, private exchanges run by large financial institutions or wholesalers such as citadel securities and virtue that execute orders internally. Critics say that payment for order flow or pfof represents an inherent conflict of interest sensibly, observing that brokers should be rooting, orders where they can get the best price for their customers, not the best deal for themselves.

Supporters argue that pfof benefits retail investors, as market makers are required to provide prices that are better than quotes displayed by regulated exchanges. They add that broker profits from pfof allow them to offer commission free trading, but it's far from clear whether pfof actually reduces costs for retail investors or simply makes their costs less transparent by allowing market makers to attract order flow with a lawful bribe, not the best Price pfof gives them every incentive to hide the true price at which they're willing to trade, probably leading to poorer executions for retail traders. Unlike market makers on public exchanges, dark pools and wholesalers are not required to publish and stand behind quotes when they pay for an order. They have the discretion to trade against it or send it to an exchange.

While exchange market makers must improve a published price by a penny, there's no such requirement for dark pools and wholesalers, which can and do improve price by tiny fractions of a cent. Thus pfof affords them a luxury of not having to compete on price, to draw order flow and to step in front of those who do with minimal price improvement. This reduces competition, but also creates disincentives for others to publicly expose their trading interest, knowing dark pools and wholesalers can so easily and cheaply jump ahead of them. The relationship of pfos to price and quality was vividly illustrated in a recent enforcement settlement brought by the sec against robin hoods.

In that case, robin hood explicitly agreed to accept less price improvement for its customers in return for a higher pfof. The inferior executions given to those robin hood customers may well have exceeded any benefit from not paying a commission. Long ago. The uk's financial services authority wisely recognized the harm of pfof to market quality and integrity, in effect banning it back in 2012., a study conducted by the cfa institute of uk markets found that absent pfof markets were more liquid and pricing improved for retail investors.

The reason is simple: when market makers have to compete on the quality of their public quotes and are rewarded with trades at those quotes, they compete more aggressively and incentives are aligned. Ironically, bernie madoff of ponzi scheme fame pioneered the use of pfof in the 1980s arguing to the sec that it would increase competition for exchanges then dominated by the new york stock exchange. The exchange market share has indeed shrunk to barely half, but concentrations have accumulated off exchange wholesale is now account for 38 of us trading volumes mostly dominated by seven firms, and those seven firms include citadel and virtue as well. Market share for retail orders is even more concentrated, with citadel accounting for 47 percent.

This market dominance brings tremendous advantages for citadel, including a privileged first look at retail order flow, a force that increasingly moves share prices, as we have seen recently with gamestop and other meme stocks. Gensler said a number of market structure. Reforms are on the table, including banning payment for order flow that may be difficult, as many free brokers might start charging commissions again to make up for lost revenue. This would be unpopular with retail investors, who also vote and make political decisions or political donations.

However, the return of commissions is not a foregone conclusion. Brokers such as fidelity are able to offer commission free trades without resorting to payment for order. Flow pfof serves as another reminder to all regulators to scrutinize schemes, purportedly benefiting the little guy history is replete with them. Madoff will be forever remembered for his multi-billion dollar ponzi scheme, but his more impactful legacy may be the damage to investors from pfof.

Let's hope the sec can find a way to make things right now. I think this is a really really big deal in 2015. The ft was sold for 1.32 billion dollars and has reported 1 million paying subscribers. This therefore makes it a very, very large source of financial media, and hopefully bringing even more spotlight to the issue that is pfof can only be a good thing now guys before i dive any further.

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Sec final rule, regulation of dark pools and alternative trading systems or ats's sec rule 304. A 4 suspension limitation or revocation to the exchange this rule effectively allows the sec to ban halt, limit, restrict or revoke access entirely to any alternative trading system, ats and or dark pools that connect to the exchange. The sec can fully enforce this rule at any time. For a period of up to 12 months, if deemed beneficial to retail investors, the rule also states that procedures to carry out said rule are already in place.

The rule was passed in october 9, 2018 and it was effective 60 days thereafter and therefore the rule is already in place and at any time gary gensler can enact this rule and ban darkpool trading for amc or gamestop, and therefore this rule was created for the Exact situation we're in right now the sec just two weeks ago, fully acknowledged that a very large portion of retail orders were being routed through dark pools, and there was also a lot of unusual activity going through these dark pools and also a lot of unusual activity. Going on in the market at the moment as well, it seems like every day a new rule gets passed. New requirements to be met all good things, but i can't get past why all that's needed for a branch of the government to do the only job they have i'm sure they're working behind the scenes. So i don't want to sound negative, but it almost seems as if the sec is intimidated by just one or two companies.

All this chaos extra work, public scrutiny, mocking of the new york stock exchange. The root of all this is contained on a few flaws, or a few problems within a single building, while updated rules will certainly benefit the future. We also need to realize the rules in place now are being broken. For example, we can all agree: pfof or payment for order flow exposes a conflict of interest, but it's not the actual problem.

Pfof rules do not allow orders to be rooted wherever it benefits the greedy hedge fund. It does not allow more than half of the orders to go through dark pools and atss to manipulate prices and bankrupt companies, not to mention steal from retail investors. All that is done by a single entity, almost perhaps just a very small group, of no more than five people at the top. So while i am for all the new rules to benefit the future, the above rule is in place now and would benefit us today.

What this is getting at is the payment for order flow, isn't necessarily the problem. Yes, it exposes a conflict of interest because we aren't necessarily getting the best execution price. What the problem actually is is what pfof enables pfof enables tons and tons of retail orders and tons and tons of orders in general to be rooted through dark pools and non-lit exchanges. These dark pools and non-lit exchanges, don't have the same kind of regulation and therefore don't have the same kind of transparency and therefore are much more open to manipulation.

Therefore, it isn't necessarily pfof. That's the problem. It's dark paul abuse, that is the problem and there's already a rule in place for gary gensler to end that abuse right now, the sec have already acknowledged dark pool abuse and stopping it would benefit every single person invested in a stock market. This can be enforced tomorrow.

This is the catalyst we don't have to wait for. So let's start talking about this. Obviously i have mentioned this rule in one of my previous videos a few weeks ago. Hence why there's some credit here to me, but at the end of the day i think we just need to bring more and more awareness to this specific rule.

If we can talk more about this rule, then hopefully gary gensler will have no choice but to implement it, obviously, as always i'll, be sure to link this post and also the sec extract of that ruling down in the description below, and i also wanted to talk About the buffer indicator hitting yet another all-time high, this is something i covered in my video yesterday, but this graph better explains it because it goes all the way back to 1990., i'm more and more convinced that a market crash is absolutely imminent now, and that is What will finally set off the mother of all short squeezes, rather than the other way around, so this is a chart that shows the buffer indicator and also explains the different categories, such as strongly undervalued, undervalued, fairly valued, overvalued and strongly overvalued. As you can see, the previous all-time high was back in 2000, just before the dot-com bubble exploded when there was around about a 60, maybe a 62 increase above the standard deviation actually to create myself. If i just read here, the internet bubble was 67 increase on the standard line. We then saw a subsequent fall after the dot-com bubble, exploded and also a subsequent fall as well back in 2008.

Right now, as of september, 2nd 2021 we're currently 95 higher than the long term trend line. As you can see right now, the market is very, very overvalued, but how is the market and how, more importantly, is the government reacting to the market being so overvalued? Well, the federal reserves, rosengren and kaplan are said to be selling all of their stocks amidst the growing ethical concerns, and this is happening while stocks are at an all-time high after owning those shares for numerous years among new insisted, fed tapering talks. It seems like a very coincidental time for high-ranking members of the federal reserve to be selling all of their stocks, they've owned for many many years and also seems like a great idea to be selling them because of ethical concerns. I personally think there's nothing to see here and that this is very, very usual activity and that's not sarcasm at all.

Just in case you didn't pick up that was entirely sarcastic and i think that is possibly the worst excuse. I've ever seen to be selling all of their stocks they're clearly selling their stocks, because they know a market crash is just around the corner. Although a very, very important possibility is that the market won't crash until the one percent get all of their money. Out of the stock market, the more i keep thinking about it.

I realize something: heads of the federal reserve are dumping stocks. Warren buffett has been doing it all year. My theory is, the government is well aware of what's happening and the sec are working together with their donors and special interest groups think about it. They can't sell billions and billions of stocks at once, because it will crash prices and therefore they've slowly been pulling money out of the stock market for months.

The stock market bleeds red seemingly like once a week and then there's a baby bounce and the stimulus or retail money pours back in now. When all of that one percent is liquid and have sold all of their stocks, the stock market collapses and they buy it. All back for pennies on a dollar guys be sure to. Let me know down in the comments below what you think about the ft: writing about the sec needing to ban payment for order flow and about the article being written by a former chair of the fdic.

And if you haven't already be sure to check out those links down in the description below to moomoo and free trade, to get some free shares and always guys, if you enjoyed this video, be sure to check out some of my others. Alternatively, subscribe to the channel and ding that notification bell, because that way, you'll be alerted when i upload a new video cheers.