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1/4% Tax on all stock trades pushed in NY Times today
- Thread starter seasideheights
- Start date
Quote from Anaconda:
It will follow the same exact logic as short locate rules. Certain entities will be exempt, like primary Market Makers (hmm, Goldman, JP, etc.) and possibly major B/Ds. The reasoning? For the stability & proper functionng of our vital financial markets.
You know, this thread illustrates how little streets smarts and clever common sense there is among the ET community. It's not rocket science of why a transaction tax would be pushed by the big boys of Wall Street. It is an opportunity to create an edge due to a very significant barrier to entry. Those who lobby & pay off politicians will get exemptions. Have you seen how much money Goldman contributed to Obama, by the way?
Either the top 3-5 firms will have exemption only on their market making, allowing them to fully dominate daytrading/scalping activities via boxes or it will be similiar to UK, where they will be the only firms through whom you can daytrade, giving them a near monopoly on the commission business. A few smaller fish will get in on the racket as well, here and there.
Exactly. Regulation and taxation has nothing at all to do with the stated intentions for the regulation and taxation. It has everything to do with creating economic rents for industry insiders and big companies. However, I do think that they will probably extend exemptions, if any, to all market makers because it's pretty difficult to write regulations which exclude small market makers and the big guys don't try for that because they are afraid of breaching anti-trust regulation and they're not bothered by microscopic market making firms anyway.
The tax will gum up the markets. It'll widen spreads, increase the cost of capital for companies and generally discourage investing and listing on U.S. exchanges. This "economist" quoted in the NYT piece, Baker, is a rank idiot and he should have his Ph.D. revoked.
Quote from Cutten:
This probably won't pass, although there is a risk. The exchanges, Wall Street, and Chicago/NYC will be strongly against it, as the finance industry will be dealt a death blow on top of the cascade of bad news it has already suffered. Even if the law passes, then there are other countries which don't have transactions taxes, so you will still be able to earn a living, albeit a less good one because the liquidity and information will be lower.
However, it would be a foolish trader who does not work extremely hard for the next year or two, building up their capital from daytrading profits, and working on their position-trading or investing skills. If this tax does come in, short-term trading in the USA will be finished for decades. Once a law is on the books, it takes a long time to get it off, even if it's dumb. Legislative inertia is very real. For that reason, I'd recommend all US-based traders to agitate, contact representatives, and if you have the money, it could even be a profitable use of capital to hire lobbyists.
How does it feel to live in a quasi-socialist country?
"When I picked up my newspaper yesterday, I thought I woke up in France"
- Senator Jim "Nostradamus" Bunning
N.B. the UK tax is only on shares, not on futures or derivatives.
I nominate this for "best comment on the thread" award. Truly hit the nail on the head.
Quote from FightTheFuture:
(But it's okay to remove $100 billion per year from investors' pockets via a transaction tax) [/B]
$100 billion = "only in theory."
If they tax them like this, futures, forex, stock & options day traders will die off (who will pay $500 tax a contract to trade???). Thus tax revenue from this goes away, not be gained.
The exchanges and brokers will shrink, cutting further tax revenue
Even investors may invest less in stock with a tax. Cutting off some of the liquidity that makes companies have access to $$$ to grow.
Some institutions will relocate offshore.
$100 billion a year? I would be amazed if it got even half of that, not counting the lost tax and jobs.
If you're an American citizen or resident I don't think they will let you get away with that....Quote from skylr33:
I am a scalper on the 30 year bonds, and if the government places this tax on us, then I'll start looking at other markets to trade, like FESX in Europe. If necessary, I will find a futures broker to use outside of the U.S.
Quote from Angrycat:
Although, Anaconda, I can't see the exchanges getting behind the tax. They depend solely on volume and this would kill volume.
Look at who owns & truly runs the exchanges. They are publicly traded. Banks/BDs are common, Goldman, Barclays and a few other familiar names pop up. They will get the core volume that they need, one way or the other. If they have to add or raise fees to compensate, so be it.
The daytrading mentality is reaching for rationalization as if this would destroy the whole market, but the reality is that the investor is not affected significantly by this rule. Your standard institution is not either. This tax is only significant on the scalping time frame. It renders daytrading on a tiny time frame near impossible, just like it was back in the days before electronic exchange and dirt cheap commissions. Anyone want to look up what it cost your average retail trader to do a roundtrip 30 years ago? Some guys here know from experience.
Think of it this way. What if the exchanges raised their fees back to 1960-1970 levels? You would have the same effects, even on the Big Wall Street firms. Let's say that the Wall Street cronies gang got special pricing, hence giving that edge they used to enjoy. Quickly competition would appear, as technology has made the fees of that size obsolete.
With a tax, you accomplish the same, while rendering possible exchange competition helpless. The exemptions are the exclusive edge.
The big guys are evolving and taking that edge back. At best, the requirements for exemption will be capital intensive with legal & bureaucratic bullshit.
I doubt this would be implemented soon, but it has gotten more juice in the recent years.