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1/4% Tax on all stock trades pushed in NY Times today
- Thread starter seasideheights
- Start date
Quote from justrading:
Tom, as I said in my other post, I get clobbered with a 0.01% VAT on my local trades here in Thailand and I still do better than 20% per year on average. No calculation needed, I already pay the tax here and I am talking about my nett result.
Even if I trade FX with Oanda and use the 50:1 leverage (which I would not), for a 0.001% FTT to put me out of business, I would have to average no more than 0.1% profit per trade after commissions (ie 0.001% *50*2 sides). I'm not in the HFT game so if all I made was 0.1% per trade I would quit and leave my money in the bank.
But let's be crystal clear, this is only if there is no cascading or multiplier effect.
If anyone is interested, this is the calculation for a small account.
Capital per trade - $10,000
Trade value @ 50:1 = 10,000 x 50 = $500,000.
Assume close trade at breakeven, round turn value = 500,000 x 2 = $1,000,000
FTT @ 0.001% = 1,000,000 x 0.001% = $10
On capital of $10,000, $10 = 0.1%
Clearly this example does not factor in commissions, so breakeven would be 0.1% + RT commission, beyond that profits.
I'm not familiar with FX, but a $14 per round trip (.01%) FTT will wipe out 90% of all short-term ES traders and a $42 per round trip tax will wipe out 100% of all short-term ES traders.
There is no proposal for a .001% FTT in Europe or the US. The proposals are for .01% and .03% respectively on futures contracts.
Quote from southall:
The discussion today was about this latest Korean news, which is 0.001% on kospi futures and 0.01% on options.
Thank you for noting this.
What I was trying to illustrate was that a 0.001% FTT is not the end of the world, and I used the ES to illustrate that.
I clearly stated that I was using the ES as a proxy for the Kospi, but obviously that confused some people.
Quote from southall:
The discussion today was about this latest Korean news, which is 0.001% on kospi futures and 0.01% on options.
That's fine, but I'm trying to make clear that the current FTT proposals in the US and Europe are much higher -- by a factor of 10 to 30 times higher -- and will wipe out short-term traders in the USA and Europe.
Quote from justrading:
Thank you for noting this.
What I was trying to illustrate was that a 0.001% FTT is not the end of the world, and I used the ES to illustrate that.
I clearly stated that I was using the ES as a proxy for the Kospi, but obviously that confused some people.
Yeah 0.001% is quite low and wont effect all traders, only the very most active ones.
But like i said before it sets a bad precedent and once introduced could easily be increased in future by a less market friendly government.
Quote from tomdavis:
I'm not familiar with FX, but a $14 per round trip (.01%) FTT will wipe out 90% of all short-term ES traders and a $42 per round trip tax will wipe out 100% of all short-term ES traders.
There is no proposal for a .001% FTT in Europe or the US. The proposals are for .01% and .03% respectively on futures contracts.
I am not going to disagree that $14 RT on the ES is punitive.
As I said in my other post, I was merely using the ES to illustrate the effect of the 0.001% Korean FTT on Kospi Futures.
I have recently been looking at options commissions, and was staggered to learn that OptionsXpress charge $12.99 + $0.75 per contract per side for futures options, an obvious deal-breaker for me.
There is an acceptable cost of doing business, and then there is the unacceptable.
Quote from justrading:
I am not going to disagree that $14 RT on the ES is punitive.
As I said in my other post, I was merely using the ES to illustrate the effect of the 0.001% Korean FTT on Kospi Futures.
I have recently been looking at options commissions, and was staggered to learn that OptionsXpress charge $12.99 + $0.75 per contract per side for futures options, an obvious deal-breaker for me.
There is an acceptable cost of doing business, and then there is the unacceptable.
US lawmakers are discussing a .03% FTT on futures and still others are demanding .05% tax which would put a $42-70 round trip FTT on the ES.
Quote from southall:
Yeah 0.001% is quite low and wont effect all traders, only the very most active ones.
But like i said before it sets a bad precedent and once introduced could easily be increased in future by a less market friendly government.
the same cannot be said for stock traders where the suggested rate is.1% or .001 which to repeat is10x the futures rate.
as a reminder the title of this thread 1/4% Tax on all stock trades pushed in NY Times today
Quote from zdreg:
instead of dealing with the issue you dance around it and bring peripheral issues to the fore.
are you incapable of showing that a tax of .001 would put an active stock trader out of business.
it probably is the case if your response was the soliloquy above.
Define active stock trader?
I swing trade Thailand stocks and a 0.01% tax has not killed me.
I also illustrated the effect of 0.001% tax at 50:1 leverage in another post.
Is that not clear enough?
Quote from tomdavis:
What is being proposed in the EU (FTT likely to be implemented via enhanced cooperation) is .01% on futures and what is being proposed in the United States Congress (Harken bill) is .03%.
These taxes amount to $14 per round trip and $42 per round trip respectively on the ES.
My calculations are as follows:
ES Contract Value = $70,000.
one percent of ES value = $70,000/100 = $700
one tenth of one percent = $70
one one-hundreth of one percent = $7.
This is applied to each side of the trade for a total of $14 per round trip.
The Harken Bill currently in US Congress proposes 3 times this amount (.03%) on futures, or $42 per round trip on the ES.
Please correct me if I'm wrong.
Your calculation is correct, and I will accept what you say about the Bill.
To reiterate, I was illustrating the effect of a 0.001% FTT as being small. Obviously as the % increases, it becomes punitive.
More importantly, as Southall noted, once an FTT is in place it becomes that much easier to tinker with the detail.