Dave Lauer is mobilizing individual investors in favor of a stock-market overhaul We the Investors co-founder Dave Lauer advocates for so-called ape investors. JESS DEEKS FOR THE WALL STREET JOURNAL By Alexander Osipovich April 28, 2023 9:00 am ET 43 Dave Lauer was once a quant at hedge fund Citadel. Now he is a thorn in the side of Wall Street in a battle over how individual investors’ trades are handled in the U.S. stock market. Mr. Lauer is the co-founder of We the Investors, an advocacy group that draws much of its energy from apes—investors active on social media who tend to favor meme stocks such as GameStop Corp. and AMC Entertainment Holdings Inc. His followers have sent more than 5,000 letters to the Securities and Exchange Commission to opine about a package of proposals that, if passed, would represent a significant change to the plumbing of the U.S. equities markets. We the Investors has largely welcomed the SEC’s efforts, although in some cases it has urged alternative approaches. On the whole, the group has been a rare pillar of support for the agency’s leader, Chair Gary Gensler, whose plans have been criticized by financial-industry groups and hammered by lawmakers in Congress. The SEC chair got a friendlier response in online video chats organized by We the Investors, where he took questions from Mr. Lauer and ape activists, including a Reddit user who goes by the name PlatinumSparkles. “Good to see you, Platinum,” Mr. Gensler told her during the second such question-and-answer session in February. Among the SEC’s proposals is a plan to send many of the stock orders placed by individual investors into auctions, where firms could compete to execute them. That would mark a change from the current system, in which brokerages send many orders to electronic trading firms known as wholesalers. The biggest wholesaler is Citadel Securities, the sister company of the hedge fund that briefly employed Mr. Lauer in 2009. “David Lauer spent nine months as an analyst at Citadel 14 years ago,” a Citadel spokesperson said. “While he may consider himself an authority on how the equity market functions, his rhetoric is unsupported by data and often veers into conspiracy.” Wholesalers send brokers a slice of their trading profits, a practice known as payment for order flow. Last year, the dozen largest U.S. brokers received $3.1 billion in such payments for their customers’ stock and options orders, according to Bloomberg Intelligence. The idea behind the SEC’s proposed auctions is to get better prices for ordinary investors’ stock trades. Many brokers and traders say the auctions will backfire and hurt investors. “Rarely has the commission issued such an ill-considered, completely untested proposal,” Citadel Securities wrote in a March 31 letter. An SEC spokesman declined to comment. We the Investors called the proposed auctions an improvement over today’s system. It urged the SEC to go further by banning payment for order flow, a practice that Mr. Lauer considers corrupt. “The system uses individual investors as products,” he said. “It doesn’t support them.” Many brokerages, trading firms and academic researchers say individual investors get a good deal in the current system. They say payment for order flow has benefited investors by allowing brokers to offer zero-commission trading and to execute orders at better prices than those quoted on public stock exchanges. Many industry veterans say Mr. Lauer’s criticism is misguided, and they criticize him for peddling what they consider baseless conspiracy theories. “He’s gained the trust of a lot of the Reddit community, but I’m not sure the solutions he’s recommending will benefit his constituents,” said Larry Tabb, head of market-structure research at Bloomberg Intelligence. Dave Lauer, at his home in Ottawa, left high-frequency trading and became an industry critic. PHOTO: JESS DEEKS FOR THE WALL STREET JOURNAL Mr. Lauer says he provides supporting data for his claims and doesn’t promote conspiracy theories. He says his critics are riven by conflicts of interest. Raised in southern New Jersey in a family of teachers, Mr. Lauer studied economics, computer science and philosophy at Brandeis University. He worked for a high-speed-trading technology firm for four years before joining Citadel as a quantitative research analyst, a job he held for nine months. He then took a similar role at Chicago-based Allston Trading. In 2011, Mr. Lauer left Allston, a decision he says was driven by a sense that high-frequency trading wasn’t socially useful. He became an industry critic, giving media interviews and testifying in Congressional hearings about the risks of ultrafast trading. Mr. Lauer has been involved in a series of business ventures since leaving high-frequency trading. Most recently he co-founded Urvin Finance Inc., a startup that aims to deliver professional-quality market data, educational content and a social community to individual investors. Urvin raised money via a crowdfunding effort that began in 2021 and focused on individual investors, including apes upset by the end of the GameStop trading frenzy. On Jan. 28, 2021, brokers restricted investors’ ability to buy more shares of GameStop, AMC and other meme stocks. The move caused the shares to plummet and sparked outrage at Wall Street among the ape community. SHARE YOUR THOUGHTS Do you support SEC Chair Gary Gensler’s market-structure overhaul? Why or why not? Join the conversation below. We the Investors emerged as an advocacy arm of Urvin, channeling such disaffection, said Mr. Lauer, who is Urvin’s president and chief executive officer. Mr. Lauer said that he hasn’t made money yet from Urvin and that his efforts to mobilize investors for market change aren’t aimed at making a profit. “I’ve done this for a long time with no compensation at all,” he said. An earlier attempt by Mr. Lauer to challenge the industry failed last year when a New York federal judge dismissed a lawsuit in which he had served as an expert witness. Judge Jesse Furman rejected the lawsuit filed against a group of stock exchanges by the city of Providence, R.I., and other investors, who had accused the exchanges of giving an unfair advantage to high-speed traders. In his March 2022 opinion that scuttled the long-running lawsuit, Judge Furman said Mr. Lauer’s reports were inadmissible and “not based on reliable methodology.” Mr. Lauer said he disagreed with the ruling and called the lawsuit’s outcome one of the biggest disappointments of his career. He hopes his current advocacy efforts will be more successful. “People see through the arguments that the wholesalers and discount brokers are making,” Mr. Lauer said. “They see the hypocrisy, and they understand how Wall Street works.” Write to Alexander Osipovich at alexo@wsj.com
The Citadel statement is in itself a strong indication that the auctions will benefit retail investors.
Zero commissions far outweigh the half cent you MIGHT benefit from for retail traders. Don't be stupid
9 months at Citadel... How many of you are truly seeing price-improvement? What is the impact on your trading in $ v commission-savings? A fill @41.25 is the same at Fido or Robinhood via Consolidated.
Dudes been in the business for 9 nanosecends I'm not listening to anyone who lives in a shack like that...