{"id":1151789,"date":"2021-12-24T20:35:09","date_gmt":"2021-12-25T01:35:09","guid":{"rendered":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/?p=1151789"},"modified":"2021-12-24T20:35:17","modified_gmt":"2021-12-25T01:35:17","slug":"republicans-are-backing-a-bill-to-democratize-investing-but-the-sec-has-other-plans","status":"publish","type":"post","link":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/republicans-are-backing-a-bill-to-democratize-investing-but-the-sec-has-other-plans\/","title":{"rendered":"Republicans Are Backing A Bill To Democratize Investing, But The SEC Has Other Plans"},"content":{"rendered":"<aside class=\"mashsb-container mashsb-main mashsb-stretched\"><div class=\"mashsb-box\"><div class=\"mashsb-count mash-medium\" style=\"float:left\"><div class=\"counts mashsbcount\">28<\/div><span class=\"mashsb-sharetext\">SHARES<\/span><\/div><div class=\"mashsb-buttons\"><a class=\"mashicon-facebook mash-medium mash-nomargin mashsb-noshadow\" href=\"https:\/\/www.facebook.com\/sharer.php?u=https%3A%2F%2Fwww.conservativenewsdaily.net%2Fbreaking-news%2Frepublicans-are-backing-a-bill-to-democratize-investing-but-the-sec-has-other-plans%2F\" target=\"_top\" rel=\"nofollow\"><span class=\"icon\"><\/span><span class=\"text\">Facebook<\/span><\/a><a class=\"mashicon-twitter mash-medium mash-nomargin mashsb-noshadow\" href=\"https:\/\/twitter.com\/intent\/tweet?text=&amp;url=https:\/\/www.conservativenewsdaily.net\/breaking-news\/?p=1151789&amp;via=ConservNewsDly\" target=\"_top\" rel=\"nofollow\"><span class=\"icon\"><\/span><span class=\"text\">Twitter<\/span><\/a><a class=\"mashicon-subscribe mash-medium mash-nomargin mashsb-noshadow\" href=\"#\" target=\"_top\" rel=\"nofollow\"><span class=\"icon\"><\/span><span class=\"text\">Subscribe<\/span><\/a><div class=\"onoffswitch2 mash-medium mashsb-noshadow\" style=\"display:none\"><\/div><\/div>\n            <\/div>\n                <div style=\"clear:both\"><\/div><\/aside>\n            <!-- Share buttons by mashshare.net - Version: 4.0.47--><ul>\n<li><strong> Republican lawmakers are sponsoring a bill designed to protect financial transactions known as \u201cpayment for order flow,\u201d in which brokerages route their clients\u2019 trades to market makers.<\/strong><\/li>\n<li><strong>Pennsylvania Republican Sen. Pat Toomey, ranking member of the Senate Banking Committee, introduced the Investor Freedom Act of 2021 in late October to protect \u201czero commission trading and user-friendly mobile apps\u201d from Securities and Exchange Commission (SEC) rules that would prohibit payment for order flow, arguing the bill would help lower the barrier to entry for retail investors.<\/strong><\/li>\n<li><strong>Critics say payment for order flow creates a fundamental conflict of interest as brokers may not be incentivized to route trades to the best market maker for the trader but instead to the highest bidder, and SEC Chairman Gary Gensler has even floated the idea of prohibiting the practice entirely.<\/strong><\/li>\n<li><strong>\u201cOpposition to this bill seeks to reward companies who restrict access to the market for everyday Americans and stifle competition by throwing up barriers to entry for innovators,\u201d Sen. Kevin Cramer told the Daily Caller News Foundation.<\/strong><\/li>\n<\/ul>\n<p>Republican lawmakers are sponsoring a bill designed to protect financial transactions known as \u201cpayment for order flow,\u201d in which brokerages route their clients\u2019 trades to market makers.<\/p>\n<p>The practice is at the heart of the burgeoning online trading industry that has helped open up the stock market to retail investors by lowering trading fees. However, regulators have targeted payment for order flow as ripe for abuse, arguing that brokerages may be incentivized to act against their clients\u2019 interests.<\/p>\n<p>Pennsylvania Republican Sen. Pat Toomey, ranking member of the Senate Banking Committee, <a href=\"https:\/\/www.banking.senate.gov\/newsroom\/minority\/toomey-launches-effort-to-preserve-commission-free-trading\"><u>introduced<\/u><\/a>&nbsp;the Investor Freedom Act of 2021 in late October to protect \u201czero commission trading and user-friendly mobile apps\u201d from Securities and Exchange Commission (SEC) rules that would prohibit payment for order flow. The legislation is <a href=\"https:\/\/www.congress.gov\/bill\/117th-congress\/senate-bill\/3102\/cosponsors\"><u>co-sponsored<\/u><\/a> by Republican Sens. Tim Scott of South Carolina and Kevin Cramer of North Dakota, who each signed onto the bill earlier in December.<\/p>\n<p>Payment for order flow allows brokerages to charge lower trading fees, or often no fees at all, as instead they earn revenue by selling their clients\u2019 trade orders to market makers such as hedge funds, who then execute the trade themselves. <strong><a href=\"https:\/\/dailycaller.com\/2021\/09\/24\/china-cryptocurrency-tom-emmer-cynthia-lummis\/\" target=\"_blank\" rel=\"noopener noreferrer\">(RELATED: Republican Lawmakers Say China\u2019s Cryptocurrency Crackdown Is An Opportunity For America)<\/a><\/strong><\/p>\n<div id=\"attachment_7226770\" class=\"wp-caption alignnone\">\n<p id=\"caption-attachment-7226770\" class=\"wp-caption-text\">Sen. Pat Toomey questions former Treasury Secretary Steven Mnuchin during a hearing on Dec. 10. (Sarah Silbiger\/Pool\/Getty Images)<\/p>\n<\/div>\n<p>The practice is employed by many of the most popular online brokerages and trading apps, <a href=\"https:\/\/www.businessinsider.com\/personal-finance\/which-investing-apps-receive-payment-for-order-flow\" target=\"_blank\" rel=\"noopener noreferrer\">including<\/a> Robinhood, Charles Schwab, TD Ameritrade, E*TRADE and many others. Proponents of the practice <a href=\"https:\/\/robinhood.engineering\/demystifying-payment-for-order-flow-119581544210\"><u>argue<\/u><\/a>&nbsp;that because it allows brokerages to operate without charging traders a commission, it lowers the barrier of entry for smaller retail investors, thereby democratizing the market.<\/p>\n<p>Critics <a href=\"https:\/\/www.cfainstitute.org\/-\/media\/documents\/issue-brief\/payment-for-order-flow.ashx\"><u>say<\/u><\/a>&nbsp;the practice creates a fundamental conflict of interest as brokers may not be incentivized to route trades to the best market maker for the trader, but instead to the highest bidder. SEC Chairman Gary Gensler has even <a href=\"https:\/\/www.cnbc.com\/2021\/10\/19\/sec-chief-gensler-says-regulator-assessing-payment-for-order-flow.html\"><u>floated<\/u><\/a>&nbsp;the idea of prohibiting the practice entirely.<\/p>\n<p>\u201cThey [market makers] get the data, they get the first look, they get to match off buyers and sellers out of that order flow,\u201d Gensler <a href=\"https:\/\/www.barrons.com\/articles\/sec-chairman-says-banning-payment-for-order-is-on-the-table-51630350595?mod=hp_LEAD_3\"><u>told<\/u><\/a>&nbsp;Barron\u2019s in August. \u201cThat may not be the most efficient markets for the 2020s.\u201d<\/p>\n<p>Toomey, who is spearheading the Investor Freedom Act, has dismissed regulators\u2019 arguments that payment for order flow creates a conflict of interest, pointing out that the practice has benefited consumers by opening up the stock market to smaller investors. <strong><a href=\"https:\/\/dailycaller.com\/2021\/11\/12\/gigi-sohn-federal-communications-commission-ron-johnson-marsha-blackburn\/\" target=\"_blank\" rel=\"noopener noreferrer\">(RELATED: Biden\u2019s FCC Nominee Gigi Sohn Wants To \u2018Silence Dissent,\u2019 Top Senate Republicans Say)<\/a><\/strong><\/p>\n<p>\u201cTens of millions of Americans are investors who never were before, and they are therefore participating in the returns of the greatest capital market on the planet,\u201d Toomey <a href=\"https:\/\/news.yahoo.com\/why-this-republican-senator-wants-to-protect-a-controversial-trading-practice-141219129.html\"><u>told<\/u><\/a> Yahoo Finance in November, arguing that payment for order flow was \u201cnot the whole reason, but it\u2019s a contributing factor.\u201d<\/p>\n<p>Charles Schwab, which operates an online trading platform and brokerage, <a href=\"https:\/\/www.opensecrets.org\/orgs\/charles-schwab-corp\/recipients?candscycle=2020&amp;id=D000000414&amp;toprecipscycle=2016\"><u>donated<\/u><\/a>&nbsp;$16,800 to Toomey and $9,400 to Scott during the 2016 election cycle in which both senators were running, according to campaign finance data from OpenSecrets. The firm also <a href=\"https:\/\/www.opensecrets.org\/orgs\/charles-schwab-corp\/recipients?candscycle=2020&amp;id=D000000414&amp;toprecipscycle=2018\"><u>donated<\/u><\/a>&nbsp;$8,100 to Cramer in 2018 during his senatorial campaign.<\/p>\n<p>Morgan Stanley, the owner of E*TRADE, <a href=\"https:\/\/www.opensecrets.org\/orgs\/morgan-stanley\/recipients?candscycle=2020&amp;id=d000000106&amp;toprecipscycle=2016\"><u>donated<\/u><\/a> $27,200 to Toomey and $10,000 to Scott in 2016, and $2,700 to Cramer in 2018. Ally Financial <a href=\"https:\/\/www.opensecrets.org\/orgs\/ally-financial\/recipients?candscycle=2020&amp;id=D000034090&amp;toprecipscycle=2016\"><u>donated<\/u><\/a>&nbsp;$2,500 to Scott and $2,000 to Toomey, TD Ameritrade <a href=\"https:\/\/www.opensecrets.org\/orgs\/td-ameritrade\/recipients?id=D000022274\"><u>donated<\/u><\/a> $2,700 to Cramer and The Vanguard Group <a href=\"https:\/\/www.opensecrets.org\/orgs\/vanguard-group\/recipients?candscycle=2018&amp;id=D000022305&amp;toprecipscycle=2016\"><u>contributed<\/u><\/a>&nbsp;$7,000 to Scott and $1,400 to Toomey.<\/p>\n<div id=\"attachment_7120187\" class=\"wp-caption alignnone\"><img decoding=\"async\" aria-describedby=\"caption-attachment-7120187\" class=\"size-full wp-image-7120187\" src=\"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-content\/uploads\/2021\/12\/GettyImages-530148982-2-scaled-1.jpg\" alt=\"NEW YORK, NY - MAY 10: Co-founder and co-CEO of Robinhood Vladimir Tenev speaks onstage during TechCrunch Disrupt NY 2016 at Brooklyn Cruise Terminal on May 10, 2016 in New York City. (Photo by Noam Galai\/Getty Images for TechCrunch)\" srcset=\"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-content\/uploads\/2021\/12\/GettyImages-530148982-2-scaled-1.jpg 2560w, https:\/\/cdn01.dailycaller.com\/wp-content\/uploads\/2021\/02\/GettyImages-530148982-2-180x120.jpg 180w, https:\/\/cdn01.dailycaller.com\/wp-content\/uploads\/2021\/02\/GettyImages-530148982-2-620x414.jpg 620w, https:\/\/cdn01.dailycaller.com\/wp-content\/uploads\/2021\/02\/GettyImages-530148982-2-768x513.jpg 768w, https:\/\/cdn01.dailycaller.com\/wp-content\/uploads\/2021\/02\/GettyImages-530148982-2-1536x1026.jpg 1536w, https:\/\/cdn01.dailycaller.com\/wp-content\/uploads\/2021\/02\/GettyImages-530148982-2-2048x1367.jpg 2048w\" \/><\/p>\n<p id=\"caption-attachment-7120187\" class=\"wp-caption-text\">Co-founder and co-CEO of Robinhood Vladimir Tenev speaks onstage during TechCrunch Disrupt NY 2016 at Brooklyn Cruise Terminal on May 10, 2016 in New York City. (Photo by Noam Galai\/Getty Images for TechCrunch)<\/p>\n<\/div>\n<p>\u201cAt the end of the day, we want the stock market to be as accessible to the American people as possible. The Investor Freedom Act recognizes the new innovations and technologies that have made this a reality,\u201d Cramer told the Daily Caller News Foundation. \u201cOpposition to this bill seeks to reward companies who restrict access to the market for everyday Americans and stifle competition by throwing up barriers to entry for innovators.\u201d<\/p>\n<p>Cramer added that he receives \u201ccontributions from farmers and truck drivers too that appreciate good policy.\u201d<\/p>\n<p>When reached for comment, Amanda Thompson, spokeswoman for Toomey, characterized efforts to ban payment for order flow as motivated by left-wing ideology.<\/p>\n<p>\u201cSocialists are attacking Republicans for introducing legislation to protect commission-free trading because they want to make it harder and more expensive for average Americans to invest in the stock market,\u201d Thompson told the DCNF.<\/p>\n<p>She also pointed out that Toomey is not running for re-election and did not consult with brokerages before introducing the bill in response to questions about campaign contributions.<\/p>\n<p>\u201cWhen the Extreme Left and their allies in the press can\u2019t win an argument on the merits, they malign Republicans\u2019 motives. Those making this libelous smear clearly haven\u2019t bothered to look at Senator Toomey\u2019s career, which he has spent advocating for free markets and economic freedom,\u201d she said.<\/p>\n<p>Scott\u2019s office did not respond to the DCNF\u2019s request for comment.<\/p>\n<p>Payment for order flow drew attention in early 2021 amid the GameStop <a href=\"https:\/\/dailycaller.com\/2021\/01\/28\/robinhood-stops-trading-gamestop-amc-wallstreetbets-reddit-nokia-amc\/\"><u>short squeeze<\/u><\/a>&nbsp;after retail investors were temporarily prevented from trading on certain brokerage apps. The events <a href=\"https:\/\/financialservices.house.gov\/uploadedfiles\/hhrg-117-ba00-20210218-sd002.pdf\"><u>resulted<\/u><\/a>&nbsp;in a House Financial Services hearing in which lawmakers questioned the practice, among other topics.<\/p>\n<p>The SEC also released its <a href=\"https:\/\/www.sec.gov\/files\/staff-report-equity-options-market-struction-conditions-early-2021.pdf\"><u>report<\/u><\/a>&nbsp;on the GameStop situation in late November echoing prominent criticisms of payment for order flow.<\/p>\n<p>\u201cThese payments can create a conflict of interest for the retail broker-dealer,\u201d the SEC wrote.<\/p>\n<p>Content created by The Daily Caller News Foundation is available without charge to any eligible news publisher that can provide a large audience. For licensing opportunities of our original content, please contact <a href=\"mailto:licensing@dailycallernewsfoundation.org\">licensing@dailycallernewsfoundation.org<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Republican lawmakers are sponsoring a bill designed to protect financial transactions known as \u201cpayment for order flow,\u201d in which brokerages route their clients\u2019 trades to market makers. Pennsylvania Republican &#8230;<\/p>\n","protected":false},"author":96,"featured_media":2315279,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_mo_disable_npp":"","fifu_image_url":"","fifu_image_alt":"","footnotes":""},"categories":[],"tags":[],"class_list":["post-1151789","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry"],"_links":{"self":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/posts\/1151789","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/users\/96"}],"replies":[{"embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/comments?post=1151789"}],"version-history":[{"count":0,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/posts\/1151789\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/media\/2315279"}],"wp:attachment":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/media?parent=1151789"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/categories?post=1151789"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/tags?post=1151789"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}