Quote from GoldStandard:
What would be the motivation for wanting to get rid of daytraders? Aren't daytraders producing commissons and profits for the industry? Or do you think that too many are successful and they're viewed as competition to be stamped out? I don't have any problem believing in hidden agendas but I'm not sure I understand the motivation here.
I confess that I'm not familiar with the daytrader business model, but my understanding is that these firms extend certain privelages that used to belong only to professional traders to anyone who is willing to comply with the daytrading firm's terms and conditions. Correct me if I'm wrong.
If that is the case, then what was once available only to floor traders who were under tight Big Brother surveillance in one physical location, is now available to the public. A fact for which I will always love technology. A public, mind, that is out of the grasp of Big Brother. The government hates not being able to spy on and control the banal minutia of every citizen's life. I wish this were hyperbole, but just think about the number of daily decisions you make in which government has somehow controlled your access to information, products, rights to dispose of your own property, etc. in your private life. In business, it is much worse. I can think of no business that is not regulated in the United States.
It is the job of regulation to exclude. The primary purpose is to build barriers to entry and protect the model that is not only easy for government to understand, but easy for the government to control. Who favours such a model besides government? The existing insiders. Less competition from them (although, not all of us feel this way). Imagine the access and innovation that destroys. Imagine the cronies that creates.
These tests, not so incidentally, are imposed by the SEC because other exchanges resent the competition from the CBOE that results from the low barriers to entry in Chicago. I applaud and admire the Chicago exchanges for holding on to these low barriers to healthy competition.
This, btw, is also the reason that the SEC has been desperately trying to control hedge funds. Screeching "shadow banking" and "systemic risk", the government has been trying for years to bring the hedge fund industry under its direct control - to submit to the power of the central government.
Turns out the only system risk we had was within the walls of the diseased, poorly incentivized, crony-controlled and politically privileged super-regulated banks already under government control. Hedge funds blew up left and right in 2007, 2008 and 2009 without any impact on the financial system. But, government finally found a way to tie the noose around the hedgies' necks too.
Using the crisis (a disaster of the government's making) as a pretext, the congress passed Dudd-Frank and brought even tiny hedge funds under its control (so they can screw them up the way they've screwed up banks, ratings agencies, and the housing market - among many other things).
This is not a conspiracy - it's merely the same old government war on private enterprise. On liberty. Hedgies and day traders are merely the latest victims of encroaching government.
I remember when portfolio margin was introduced in 2007, a mass of locals escaped the iron fist of FINRA into customer accounts. The relief among them was palpable. Even if they made less money, most were rich enough not to care and the freedom from not complying with the inanities of over regulation was worth every forgone penny.
