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

Quote from RedDuke:

So, if I buy a futures contract, I'll have to pay $1.25? If yes, this is not an issue.
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Yeah it would be great if it was 1.25 on a round turn but look at what this guy says, it would be a 1.25 if you purchased 500 dollars of stock. We know the value of an sp contract is about 50-60k so thats about 150 bucks each way or 300 round turn. This guys letter is nuts. That means it would be 1.25 if we bought 5 shares of a 100 dollar stock
 
Quote from rsikit:

Yeah it would be great if it was 1.25 on a round turn but look at what this guy says, it would be a 1.25 if you purchased 500 dollars of stock. We know the value of an sp contract is about 50-60k so thats about 150 bucks each way or 300 round turn. This guys letter is nuts. That means it would be 1.25 if we bought 5 shares of a 100 dollar stock
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Well, if you invest like Cramer tells you, you would buy 1 share at a time. Then you wouldn't pay much transaction tax at all! Man he is so smart.
 
Quote from RedDuke:

So, if I buy a futures contract, I'll have to pay $1.25? If yes, this is not an issue.
More...

ES:1100pts * $50=
$55,000*0.0025 (0.25%)=
$137.50 per side or $275 per RT.


The 0.25% tax is the introductory rate. It will increase as all taxes do.

The exemptions are meaningless, they can be removed.

The cost of the tax is nothing compared to the increased spreads and broker fees that will result when liquidity is removed.
 
Well first let's look at this from our perspective. I am a scalper of emini sp500 futures. If the tax proposal is enacted as it stands now, the individual scalper like myself and many others would be driven out of the market. I don't know how much revenue the CME gets from the emini index market, but I have to gather it is siginficant. Talking to my broker, he said the a majority of Series 3 futures brokers would lose their jobs since a siginifcant chunk of their business are emini index daytraders.

What is coming down the road is a preliminary report of the tax from the IMF in April and a final report in June. There is no gurantee that the report will be totally favorable. Should the g20 act, it would probably have to wait until the June 2010 meeting in Toronto. There will be a summer recess for Congress and then election season starts in the fall. I don't see too many bills being passed prior to the election. I could be wrong. I'll take an educated guess that the tax really won't be looked at seriously until the new congress is in place in 2011.

Also, we have to look and say that Pelosi and Obama aren't totally with this as it stands now and the Defazio bill has only 27 sponsors as of last I looked. That is not much.

What I can see happening is that in all legislation, compromises and negotiations happen all the time. The tax might pass if Obama can assure his boys in Chicago CME that it would not be hit hard from the loss of daytraders. Maybe for futures the tax would be based on the margin amount and not the notional value of the entire contract. The notional value of the emini sp500 contract is (1100X50) $55,000. (Please correct me if I am wrong in that calculation) the .02% tax would be $22 on a round trip. You have to guarantee yourself at least 1 point every trade to break even after commissions. That can be pretty tough. Now if they negotiate a deal that the tax is based on the current $5625 margin. The tax becomes more reasonable and in my opinion everyone can look like they are a winner.

Also, as Pelosi pointed out, the tax must be global to work or traders will just go to another country where they are not taxed. There is good reason to believe with 24 hr electronic markets that emini sp500 could just move to Singapore. You don't think they wouldn't do it? The CME trades foreign indicies, there is no reason to believe Singapore wouldn't open an emini sp500 contract on their 24 hour exchange. Why? Becasue they could make all the money the CME loses. Yeah the margins for foreign traders would probably be double, just like the CME, but who cares, you can still trade.

The above post is just my humble opion and any critique is welcome.
 
Quote from FightTheFuture:

ES:1100pts * $50=
$55,000*0.0025 (0.25%)=
$137.50 per side or $275 per RT.


The 0.25% tax is the introductory rate. It will increase as all taxes do.

The exemptions are meaningless, they can be removed.

The cost of the tax is nothing compared to the increased spreads and broker fees that will result when liquidity is removed.
More...

FF

according to DeFazio's own website the tax on futures contracts is .02%

http://www.defazio.house.gov/index.php?option=content&task=view&id=532

The legislation assesses a small securities transaction tax on Wall Street. A securities transaction tax is applied to:

•Stock transactions (tax rate will be 1/4 of 1 percent--0.25%),
•Futures contracts to buy or sell a specified commodity of standardized quality at a certain date in the future, at a market determined price (tax rate will be 0.02%)
•Swaps between two firms on certain benefits of one party's financial instrument for those of the other party's financial instrument (tax rate will be 0.02%)
• Credit default swaps where a contract is swapped through a series of payments in exchange for a payoff if a credit instrument (typically a bond or loan) goes into default (fails to pay) (tax rate will be 0.02%)
•And options, which are contracts between a buyer and a seller that gives the buyer the right, but not the obligation, to buy or to sell a particular asset on or before the option's expiration time, at an agreed price (at the rate of the underlying asset)

Again if I misunderstand the math I humbly stand corrected. :)
 
Quote from spunkmeyer:

Well first let's look at this from our perspective. I am a scalper of emini sp500 futures. If the tax proposal is enacted as it stands now, the individual scalper like myself and many others would be driven out of the market. I don't know how much revenue the CME gets from the emini index market, but I have to gather it is siginficant. Talking to my broker, he said the a majority of Series 3 futures brokers would lose their jobs since a siginifcant chunk of their business are emini index daytraders.

What is coming down the road is a preliminary report of the tax from the IMF in April and a final report in June. There is no gurantee that the report will be totally favorable. Should the g20 act, it would probably have to wait until the June 2010 meeting in Toronto. There will be a summer recess for Congress and then election season starts in the fall. I don't see too many bills being passed prior to the election. I could be wrong. I'll take an educated guess that the tax really won't be looked at seriously until the new congress is in place in 2011.

Also, we have to look and say that Pelosi and Obama aren't totally with this as it stands now and the Defazio bill has only 27 sponsors as of last I looked. That is not much.

What I can see happening is that in all legislation, compromises and negotiations happen all the time. The tax might pass if Obama can assure his boys in Chicago CME that it would not be hit hard from the loss of daytraders. Maybe for futures the tax would be based on the margin amount and not the notional value of the entire contract. The notional value of the emini sp500 contract is (1100X50) $55,000. (Please correct me if I am wrong in that calculation) the .02% tax would be $22 on a round trip. You have to guarantee yourself at least 1 point every trade to break even after commissions. That can be pretty tough. Now if they negotiate a deal that the tax is based on the current $5625 margin. The tax becomes more reasonable and in my opinion everyone can look like they are a winner.

Also, as Pelosi pointed out, the tax must be global to work or traders will just go to another country where they are not taxed. There is good reason to believe with 24 hr electronic markets that emini sp500 could just move to Singapore. You don't think they wouldn't do it? The CME trades foreign indicies, there is no reason to believe Singapore wouldn't open an emini sp500 contract on their 24 hour exchange. Why? Becasue they could make all the money the CME loses. Yeah the margins for foreign traders would probably be double, just like the CME, but who cares, you can still trade.

The above post is just my humble opion and any critique is welcome.
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Yeah, but even with a low futures tax ES volume would drop significantly as the hedgers of stock baskets/pair traders wouldn't do any stock trades/pair trades and so no futures trades (think of SPY, too). Everybody will be hurt with wide spreads even in now liquid futures markets like ES. This will come as trading costs on top of a tax.
I still say it is too insane to come true. It is financial suicide.
Everybody would just trade through Asia/Switzerland/whatever hole there is and those countries would hugely benefit. US would be dead.
 
Quote from spunkmeyer:

FF

according to DeFazio's own website the tax on futures contracts is .02%

http://www.defazio.house.gov/index.php?option=content&task=view&id=532

The legislation assesses a small securities transaction tax on Wall Street. A securities transaction tax is applied to:

•Stock transactions (tax rate will be 1/4 of 1 percent--0.25%),
•Futures contracts to buy or sell a specified commodity of standardized quality at a certain date in the future, at a market determined price (tax rate will be 0.02%)
•Swaps between two firms on certain benefits of one party's financial instrument for those of the other party's financial instrument (tax rate will be 0.02%)
• Credit default swaps where a contract is swapped through a series of payments in exchange for a payoff if a credit instrument (typically a bond or loan) goes into default (fails to pay) (tax rate will be 0.02%)
•And options, which are contracts between a buyer and a seller that gives the buyer the right, but not the obligation, to buy or to sell a particular asset on or before the option's expiration time, at an agreed price (at the rate of the underlying asset)

Again if I misunderstand the math I humbly stand corrected. :)
More...

There have been several bills and media promotion over the past year. Futures as well as stocks were usually mentioned as 0.25%. This lower 0.02% for futures is DuhFazio's latest attempt.

Once they get the tax enacted, once they get a foot in the door.....

They are using these as introductory tax rates.

The cost of the tax is small in comparison to the increased spreads and broker fees.

I think Sweden's former trans tax started out low and went up to a full 2% or more on certain securities. I think there was a huge range of rates for various products. Even the lowest rates of 0.0000.... were unworkable.
 
Don't get me wrong guys, I am not for the tax at all. Right now the Defazio bill is the bill right now and probably be the House bill which generally is the more liberal tax bill. A Senate bill, which is generally more moderate will also come out. Also Defazio's bill if I am not mistaken says the tax will be enacted 6 months after passage. Both houses then have to make compromises. Shoot Schumer might even put one of those Senate holds on the bill and have it in limbo forever. We might have to wait until 2012 until the tax is started if it is even passed. Like I said, the traders will just move to Asia/Switzerland. You can set up an account there and trade.
 
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