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

Quote from OldTrader:

...People will still invest. But the spreads will be wider...so not only will they pay a transaction tax, they'll pay up in terms of the spread on their stock. The remaining brokers will have to raise their commissions...because the volume won't be there to warrant the lower commissions that prevail now....
OldTrader
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Just on long term investing which affects most people, the cost will be many times greater than the proposed 0.25 percent trans tax.

Back to $100 commissions, maybe 2-5% cost of spreads. The biggest percent loss is on the huge reduction of compounding over decades of long term investing.

On blogs and forums promoting the trans tax, Joe Drunkpack's comments are all for it, "It's only a tiny 0.25% trans tax. If I invest a hundred dollars, it's only 25 cents."

25 year old kids today do not realize that they will need about $2 million to retire on. The trans tax and it's after effects might reduce that $2 million nest egg by 10-20 percent.

Apparently they think there will be no harm done to them, but they believe it will punish evil Wall Street that will most likely be exempt or find a way around it. Who are the bigger idiots, politicians or the people that they scrooge over?
 
I was doing some 'simple' math a couple of days ago on LSE (UK) stamp duty which is .005

My 'conclusion' is that about 1/2 the volume done on LSE appears to pay it while the other 1/2 do not.

Also, FYI, while spreads in some cases are wider than in US, they're often like this...

45.05 ask 45.12 bid

1045.00 ask 1049.00 bid

Stuff like Vodafone (VOD), for example have much tighter spreads as it trades 138 million shares per day.
VOD is quoted on reuters as 134.10 ask x 134.15 bid

their shares are priced in pence, btw.

So, no, spreads are not 2-5%

Commissions there for average Joe's are $10-30 per transaction.
Professional traders can find deals for the equivalent of 1 cent/share.

What I haven't yet found is the share volume in non-LSE traded instruments, especially CFD's.


Quote from FightTheFuture:

Just on long term investing which affects most people, the cost will be many times greater than the proposed 0.25 percent trans tax.

Back to $100 commissions, maybe 2-5% cost of spreads. The biggest percent loss is on the huge reduction of compounding over decades of long term investing.

On blogs and forums promoting the trans tax, Joe Drunkpack's comments are all for it, "It's only a tiny 0.25% trans tax. If I invest a hundred dollars, it's only 25 cents."

25 year old kids today do not realize that they will need about $2 million to retire on. The trans tax and it's after effects might reduce that $2 million nest egg by 10-20 percent.

Apparently they think there will be no harm done to them, but they believe it will punish evil Wall Street that will most likely be exempt or find a way around it. Who are the bigger idiots, politicians or the people that they scrooge over?
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Quote from risktaker:

I was doing some 'simple' math a couple of days ago on LSE stamp duty which is .005

My 'conclusion' is that about 1/2 the volume done on LSE appears to pay it while the other 1/2 do not.

Also, FYI, while spreads in some cases are wider than in US, they're often like this...

45.05 ask 45.12 bid

1045.00 ask 1049.00 bid

Stuff like Vodafone (VOD), for example have much tighter spreads as it trades 138 million shares per day.
VOD is quoted on reuters as 134.10 ask x 134.15 bid

their shares are priced in pence, btw.

So, no, spreads are not 2-5%

Commissions there for average Joe's are $10-30 per transaction.
Professional traders can find deals for the equivalent of 1 cent/share.

What I haven't yet found is the share volume in non-LSE traded instruments, especially CFD's.
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my cousin trades over there and the commissions are more pricier than here in the states. 1c per share he does over 5 million shares a month. his firm is the equivalent of a bright trading or assent here. does not have to pay stamp tax there but cost of doing business there is a little bit more than you would find here. he also says guys trading over there now are killing it because the programs over there are like they were here in the states back in 2000 very easy to pick off. i am very eager myself to get a demo of real tick which has real time access to the lse something to consider if for some reason the morons in washington dont exempt anybody if they impose this tax.
 
<i>They probably looked at the trading volumes and calculated how much they can make after imposing a tax.</i>

The thing is that in real life it is more complicated than that. If this tax is enacted, I would no longer trade at all.

So my trading volume would go down to 0. However, and more importantly, I paid ordinary income taxes on my short-term capital gains in 2007. Since I no longer will trade, this is now tax revenue that will be permanently gone.

Have they considered the reduced revenue from future non-existent short-term capital gains? I doubt it.
 
Politicians figure that 1 guy's capital gains are somebody's capital loss, so, small change there.


Quote from JOSEF:

Have they considered the reduced revenue from future non-existent short-term capital gains? I doubt it.
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<b>Risktaker wrote:
Not even the European "socialist" countries like Sweden/Finland have such a stupid tax!</b>

Sweden is an interesting example of the fallacy of this tax. They had it, it failed miserably and they eventually had to eliminate it.

<i>The Swedish system of taxes also played a very profound role in causing trades to migrate to non-taxed or lower-taxed jurisdictions. With the 1986 announcement that the equity tax would double, 30% of the trading volume moved to London. By 1990, more than 50% of all Swedish trading had moved to London. Foreign investors reacted to the tax by moving their trading offshore while domestic investors reacted by reducing the number of their equity trades.</i>
http://www.iimcal.ac.in/community/FinClub/art103.html

In 1991, the transaction tax in Sweden was eliminated completely.
 
It really depends how you trade but for some people this tax will make trading much, MUCH easier as big moves (short squeezes, news etc) will be much bigger due to lack of volume, spreads, etc. Others it will completely eliminate from the game unless they get an exemption which I believe will be quite easy to get or if there is an alternative market such as CFD's which I believe there will be. It would be a roadblock if this tax is introduced, but surely it would not be the end of the road.
 
<i>Politicians figure that 1 guy's capital gains are somebody's capital loss, so, small change there.</i>

Right, but for some traders (depending on incorporation, etc) one only take up to a $3,000 loss whereas for gains one must declare the entire capital gain.

So, there should be some negative impact in terms of tax revenue.
 
How much taxes (and fees) do we need to pay? Aren't we paying enough? There are so many little "fees" in the trading world.
 
Quote from OldTrader:

Pelosi is definitely for this tax. I've heard her talk about it before, around the time of TARP. In fact, it was the first time I had heard of a "transaction tax". And I have little doubt that Dodd, Frank, or Harry Reid would be for this. And personally, I don't think either Summers or Geithner have the sense God gave a goose.

This tax, if enacted, will have wide ranging impact. It is going to end your career as an active trader, because you won't be able to afford the ongoing fees. As people are driven out, it is going to impact anyone dealing with active traders...brokers, software vendors, exchanges....they're all history.

People will still invest. But the spreads will be wider...so not only will they pay a transaction tax, they'll pay up in terms of the spread on their stock. The remaining brokers will have to raise their commissions...because the volume won't be there to warrant the lower commissions that prevail now. No one is going to need an intraday chart, or a front end software, because they won't be able to consistently afford in-and-out trading.

It's all happened before. In 1986 they changed the tax law to change depreciation rules and other things which destroyed the tax shelter business overnight. Real estate, oil, and computer companies literally were destroyed at the stroke of a governmental pen.

You guys better join me in fighting this tooth and nail, because your career is at stake. And I would encourage you to speak with your brokers and software vendors...their future is at stake too.

OldTrader
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For those who haven't read Green's response to this transacton tax proposal it's a pretty good read. It's been updated with some good stuff.

Towards the end of it there is a letter from Green's in house tax attorney (Mark Feldman) which sheds some light on the talks that have taken place on this tax:

http://www.greencompany.com/EducationCenter/Greenblog011409.pdf

-Guru
 
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