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

[Midas]

Quote from Anaconda:

The wellpaid useful idiots simply assume and follow the groupthink. Taxes on speculators = good is generally what they believe because that is what the public quickly believes.
The way I see it, the tax has two purposes:
1) Appeasement to the masses
2) Attack on the litle guy trader

If you see how much Goldman, Merrill, JPM, etc lobby and contribute aka pay of the government, you will know that they are definitely behind this as it will benefit them. There is no way this transaction tax would even get any media attention, let alone make headways in Congress if Wall Street did not like it.




That is generally how it works. The real questions is how many are useful idiots versus corrupt & pretending.
I'm also talking about the journalists who are pushing this. Most of them just follow & believe the line of thinking promoted onto them.

You are missing one important point. Most of the big brokers make much more on agency transations (ie charging commissions) than they do via market making. They are and have been against this tax along with the exchanges. Simply put you make more money charging commission than you do making markets. This tax will take away a significant revenue stream.

Their lobby is the reason this dreadful tax has been knocked down in the past. However, with the rising anti Wall Street sentement, and a very liberal Congress it is in the cards.

 

[Anaconda]

Quote from Midas:

You are missing one important point. Most of the big brokers make much more on agency transations (ie charging commissions) than they do via market making. They are and have been against this tax along with the exchanges. Simply put you make more money charging commission than you do making markets. This tax will take away a significant revenue stream.

No, they don't make that much from the commission streams. Commissions are rock bottom, these are not the days of ridiculous overrides. It's a low margin game and gets tighter every year

There is a lot more money in market making for buy side firms while not dealing with thousands of daytraders getting in your way. If you talk to guys who were big firm traders in 1980s and early 1990s, they will tell you. The average Joe daytraders cut into that pie, the lack of barrier to entry kills opportunities to exploit. It's no different from comparing how much easier daytrading was 5 years ago versus now.

And this is not about 'Most of the Brokers". It's about the big elite players taking over, leaving the rest out of the loop. So while the smaller brokers are naturally opposed, the big boys have said little to nothing.

Their lobby is the reason this dreadful tax has been knocked down in the past. However, with the rising anti Wall Street sentement, and a very liberal Congress it is in the cards.

Come on, think with your head, not your emotions. Just take a look at how much Goldman, Merrill, JPM, etc contributed to Obama versus McCain.

Congress is not reacting to the sentiment, they are using it. Don't be so gullible, they don't give a sh*t about the people or the sentiment unless it serves their purpose. The government does not make mistakes, it's just that you keep falling for the bullsh*t they feed you, instead of looking at actions & effects.

 

[obama-lama]

Quote from Anaconda:


Congress is not reacting to the sentiment, they are using it. Don't be so gullible, they don't give a sh*t about the people or the sentiment unless it serves their purpose.

Precisely.

Way back when, geez, it must have been AT LEAST 1 or 2 weeks ago, I remember Congress bailing out auto companies, regardless of public sentiment. During the same time I also remember Congress releasing TARP-II, again regardless of public sentiment. And I recall, I think just a few days ago Congress approving Tim Geitner regardless of public opinion or sentiment. I don't remember anything applicable during the year 2008. :eek:

Now back on topic, transaction tax.
Keep your eyes and ears open regarding the merging of CFTC and SEC and-or the creation of some "super-regulator" agency. Either way, a merged agency or a brand new agency, a transaction "fee" will serve to provide proper oversight. You now know the pitch. And the public will buy it. Politicians will earn points.

Once unthinkable, now unstoppable
obama-lama

 

[Anaconda]

Quote from Anaconda:


There is a lot more money in market making for buy side firms

Meant sell-side

 

[listedguru]

Quote from Midas:

You are missing one important point. Most of the big brokers make much more on agency transations (ie charging commissions) than they do via market making. They are and have been against this tax along with the exchanges. Simply put you make more money charging commission than you do making markets. This tax will take away a significant revenue stream.

Their lobby is the reason this dreadful tax has been knocked down in the past. However, with the rising anti Wall Street sentement, and a very liberal Congress it is in the cards.

This is a pretty interesting read on transaction taxes. Scroll down towards the bottom titled: "negative impact."

http://www.thehindubusinessline.com/2008/08/08/stories/2008080850270900.htm

-Guru

 

[drukes1234]

Quote from listedguru:

This is a pretty interesting read on transaction taxes. Scroll down towards the bottom titled: "negative impact."

http://www.thehindubusinessline.com/2008/08/08/stories/2008080850270900.htm

-Guru

Great find guru



Negative impact:

Empirical studies have been done on this subject in past. Almost every study concludes that the levy of transaction tax has negatively impacted the financial markets.

In May, 1997, the Chinese government increased the securities transaction tax from 0.3-0.5 per cent. Its impact on the behaviour of the Shanghai and the Shenzhen stock exchanges was studied to assess the impact of the trading volume and net tax realisation on the return volatility. The study concluded that the volatility increased significantly in both the Shanghai and the Shenzhen stock exchanges after increasing the transaction tax.

Studies also concluded that the tax revenue did not increase as much as the proponents of the tax expected. Investors reacted to the increased tax dramatically. Post transaction tax increase, in Shanghai, the volumes decreased 38.47 per cent, and in the Shenzhen stock exchange, it fell 32.79 per cent. The decrease in trading volume significantly offsets the increased tax rate.

The impact of a Swedish regulatory move to impose transaction tax was the migration of business from Stockholm to London. According to a study by Swedish researcher S. R. Umlauf in 1993: “Transaction taxes and the behaviour of the Swedish stock market,” published in Journal of Finance and Economics, following the doubling of the tax, 60 per cent of the volume of the 11 most actively traded Swedish stocks migrated to London.

The migrated volume represented over 30 per cent of all trading volume in Swedish equities. By 1990, that share increased to around 50 per cent. According to Campbell and Froot (1995), only 27 per cent of the trading volume in Ericsson, the most actively traded Swedish stock, took place in Stockholm in 1988.

In 2005, Robin K. Chou and George H. K. Wang carried out a study on “Transaction Tax and Market Quality of the Taiwan Stock Index Futures”. Their findings support the argument that transaction taxes have a negative impact on trading volumes and bid-ask spread. Analysis further finds no support for the argument that a transaction tax may have the benefit of reducing price volatility. The findings suggest that market participants changed their trading behaviour before and after the tax reduction.

Based on the above, the simple conclusion one can draw is that CTT should not be levied on commodity derivatives market. Rather than justifying CTT based on STT, it is desirable to withdraw STT. After all, repeating a wrong action does not make it right.

 

[Midas]

Quote from listedguru:

This is a pretty interesting read on transaction taxes. Scroll down towards the bottom titled: "negative impact."

http://www.thehindubusinessline.com/2008/08/08/stories/2008080850270900.htm

-Guru

Guru, I will post this link when I discuss this thing on blogs that promote this tax. Thanks.

 

[crgarcia]

Quote from Wayne Gibbous:

OMG

I shudder every time this shit comes up. It would totally shut us down. Every damn one of us...

Daytraders are always losing big.

Why a bit of this losses couldn't go to gov't pockets?

 

[tomahawk]

Quote from crgarcia:

Daytraders are always losing big.

Why a bit of this losses couldn't go to gov't pockets?

As far as I know there's been no mention of only the losers of each trade having to pay the tax. They will collect .50% on each transaction (.25% from the winner, .25% from the loser).

A transaction tax would kill liquidity, which would be bad for the whole system. Long term investors buy from short term traders. If the short term traders are forced out, investors will have to pay UP for shares. Same on the way down ... crashes (especially the one that would occur right after such a bill passed) would be hideous.

 

[Midas]

Quote from crgarcia:

Daytraders are always losing big.

Why a bit of this losses couldn't go to gov't pockets?

You must be hanging around the wrong traders.