1/4% Tax on all stock trades pushed in NY Times today

[Euler]

Quote from Anaconda:



And no, it won't kill the capital markets, not even close. Lose the illussion that the daytrader is soooo important to today's markets, it's simply not true. The effect will be less significant than you think.

One rather significant effect, depending on who's excluded, will be that spreads will go up. A lot. Given that the "big boys" are excluded or have ways around it, it will mean the difference in billions a year going to big Wall Street firms vs. the "end users" of the markets -- investors and productive companies needing capital.

On the other hand, if it's airtight and there are no exemptions for anyone (which would probably take a globally coordinated effort), then it will inject a large amount of friction into global capital markets. In this case, I don't think anyone really knows what the long-term effects will be, although my GUESS is that it will generally be negative for the global economy.

 

[Anaconda]

Quote from Euler:

One rather significant effect, depending on who's excluded, will be that spreads will go up. A lot.

Ok and? Not that long ago, spreads were very wide, stocks traded in 1/8ths and commissions were huge. Markets functioned just fine, but daytrading was restricted to the insiders.

Given that the "big boys" are excluded or have ways around it, it will mean the difference in billions a year going to big Wall Street firms vs. the "end users" of the markets -- investors and productive companies needing capital.

That's generally how Wall Street works.

On the other hand, if it's airtight and there are no exemptions for anyone (which would probably take a globally coordinated effort), then it will inject a large amount of friction into global capital markets.

If naked shorting had exemptions, this will too. Regulators will not impede market making activity.

In this case, I don't think anyone really knows what the long-term effects will be, although my GUESS is that it will generally be negative for the global economy.

Which global economy? Your global economy or the elites' global economy? Two different worlds.

 

[zdreg]

"k and? Not that long ago, spreads were very wide, stocks traded in 1/8ths and commissions were huge. Markets functioned just fine, but daytrading was restricted to the insiders."

narrower spreads signify more efficient markets.
are u trying to relive the past when wall street worked even more than todayto the benefit of wall street firms?

 

[bears21]

Quote from zdreg:

"k and? Not that long ago, spreads were very wide, stocks traded in 1/8ths and commissions were huge. Markets functioned just fine, but daytrading was restricted to the insiders."

narrower spreads signify more efficient markets.
are u trying to relive the past when wall street worked even more than todayto the benefit of wall street firms?

exactly this guy anaconda is living in the stoneage, he thinks the little guy will be put out of business. i have a few buddies who trade the lse at will and are exempt and they are not the quote big guy. just an avg joe who got the exemption because their firm is a member of the lse case closed. yes the mom and pop will suffer but dont make it like the barriers to entry are like they were in the 60s 70s and 80s. technology leveled that playing field in a big way.

 

[Anaconda]

Quote from zdreg:


narrower spreads signify more efficient markets.
are u trying to relive the past when wall street worked even more than todayto the benefit of wall street firms?

First of all, you don't want efficient markets as innefficiency equals more opportunity.

Second of all, why are you all so defensive when someone simply tries to explain to you the logic & agenda behind this tax? No wonder daytraders are so easily targeted, all you can do is bitch but rarely, if ever, try to understand the issue. How do you expect to accomplish anything if you refuse to understand your enemy?

Third of all, you pretty much nailed the reason for the tax, yet still manage to label me as the bad guy. Hilarious.

 

[skylr33]

You guys need to relax. The odds of this tax actually happening are very slim! Every time we have a bear market, everyone get's their panties in a bunch, and start the debate of a financial transactions tax. Is it possible? Sure. But so is our getting hit by another terror attack. Although possible, it's highly unlikely!

 

[seasideheights]

http://caps.fool.com/blogs/viewpost.aspx?bpid=133609&t=01009449456398254945


Comments needed there folks.

 

[drukes1234]

If for some reason this tax at some point gets enacted, what would the volume be like for example in a high volume stock like AAPL that on average trades about 40 million shares per day? Would it then only trade maybe 5 million shares per day? and what about a low volume stock like GLF that trades on average 315,000 shares per day. Would it trade under 100,000 shares per day?

I know volume would fall off a cliff but big stocks that trade over 20 million shares per day will still trade probably over 5 million shares per day and the spreads would be much wider which for some traders is a good thing.

 

[wjk]

Quote from Anaconda:

You're just not getting it. It's about power & putting barriers to entry. It is about putting the little guy and the smaller financial players out of business. It's not about tax revenue, and as long as you keep referring to that, you simply do not understand what is going on.

I wouldn't be surprised if similar motives were behind the PDT rules, even at the expense of the brokers. My question is a simple one. Why don't those who wish us little guys out of the game, for whatever reasons, use their lobby power and just have us legislated out? Why even fool with a tax?

I agree with you about the barriers, but it is about the revenue as well. We're talking dem control. The mistake they make is in their lust for tax revenue (congress), they fail to see that this type of tax will hurt their cause in the end. For myself, if they pass the tax, I'll just trade 1000 shares of 1 dollar listed and nasdaq stocks. Round trip...5 bucks tax. No shortage of cheap stocks to trade in this market.

 

[drukes1234]

Quote from wjk:

I wouldn't be surprised if similar motives were behind the PDT rules, even at the expense of the brokers. My question is a simple one. Why don't those who wish us little guys out of the game, for whatever reasons, use their lobby power and just have us legislated out? Why even fool with a tax?

I agree with you about the barriers, but it is about the revenue as well. We're talking dem control. The mistake they make is in their lust for tax revenue (congress), they fail to see that this type of tax will hurt their cause in the end. For myself, if they pass the tax, I'll just trade 1000 shares of 1 dollar listed and nasdaq stocks. Round trip...5 bucks tax. No shortage of cheap stocks to trade in this market.

Yup, I would just buy large spread stocks at the bid and sell at the offer all day long, it honestly may make trading easier.