New Tax on All Stock Trades

[d08]

luisHK pretty much explained it all. With a DMA broker you don't pay the spread and I would never use a non-DMA CFD broker as I think those are just bucket shops that take advantage of unknowledgable newbies. CFDs aren't part of the stamp tax either, making them the best instrument for equities.
I'd also love to trade European markets but the current commission rates are just too expensive. I wish they'd lower the fees to attract liquidity and with the added liquidity keep their net profits at the current level. I don't see it happening, sadly.

 

[zdreg]

Really? Lol, I mean given that 90% -95% of day traders lose money worldwide, with or without stamp duty, HK day traders, who are subject to the HK stock transaction tax, on average do not seem to perform worse than their US brethren. You can of course pull up statistics from US based brokers and their reported accounts that make money vs losing accounts and compare that with those in Hong Kong, but hey, you seem to be a fast talker rather than valuing facts and statistics.

Really? Lol, I mean given that 90% -95% of day traders lose money worldwide, with or without stamp duty, HK day traders, who are subject to the HK stock transaction tax, on average do not seem to perform worse than their US brethren. You can of course pull up statistics from US based brokers and their reported accounts that make money vs losing accounts and compare that with those in Hong Kong, but hey, you seem to be a fast talker rather than valuing facts and statistics.

Would you mind to elaborate on your statements? I value your usual thought process but do not seem to reconcile this statement of yours. First of all, as already mentioned, CFDs FULLY reflect stamp tax via the CFD pricing [in the same way than shorting a share CFD has the underlying stock borrow costs reflected in the pricing of the CFD]. That is not my opinion but a sheer fact. So anyone who trades CFDs pays a fat spread and hence pays stamp tax in jurisdictions where it is assessed. Secondly, your first sentence would obviously need to be clarified. Who is everyone? Apparently LSE trades quite a lot of volume relative to all European bourses, and not all of that volume is absorbed by pension funds or long-only long-term holders. It comes down to a business scenario that has to be drawn up. Sure, someone aiming to extract 20-40 basis points may find it impossible to survive given a 20basis point tax on the transaction, but someone aiming for a 1% intraday move on higher beta names may pay the tax and take it as an additional cost of doing business. Sure, returns will always be higher without such tax. But I am saying a case can be made to ensure a profitable operation even taking into account the assessment of such levy.

"you seem to be a fast talker rather than valuing facts and statistics.[/QUOTE]"
I am a fast talker which is complete nonsense. you are a dancer who dances around reality who needs to learn basis mathematics. you got friends in hong kong who pull out a "100 basis points per day" and are glad to pay the stamp tax. somebody be kind to explain to him what the simple rate would be if you pulled only 50 basis points(.005) per trading session after paying the stamp tax. to keep it simple someone please tell him how much you have at the end of the year if you started with $100 on day 1.

 

[volpunter]

you contradict yourself: You claim the whole time that CFDs are priced in the exact same way than cash equity (which they are definitely not, else where would be no need for CFDs), then you say that the tax implications are a "bonanza for brokers who make much more money on those than on equities". Which way around would you like to have it?

So, please explain to us how that CFD DMA works for a CFD with underlying that cannot easily be shorted because of short sell restrictions, low availability of borrow inventory of the underlying, and borrow rates in general when shorting the equity. You are telling us that all those costs are nicely taken up by your broker as a service to LuisHK? Jeez, why are we even discussing this?

Fact is:

* CFD commission is different from the underlying cash equity commission for the same notional exposure
* spreads are most of the time different
= > and the above because the economics are very different between a CFD and cash equity: Different leverage rates (some extends leverage and of course charges for it), different borrow rates, different commission, different spread, different tax implications. Of course are therefore CFDs and the underlying cash not equally priced. If you claim such then you are talking utter nonsense. Not one single index CFD, for example is identically priced as the underlying index. And most equity CFDs are not priced the same as their underlying stocks, either, because most markets apply short sell restrictions among the many other issues I listed above.

Please note that I never said nor say that CFDs are inferior or superior to trading the underlying cash equity, I am saying they are not equally priced. Simple as that.

That's what I posted first :

"I suspect most funds do the same calculation I do. They try to anticipate their holding period, commissions and interests and trade dma CFDs rather than underlying stocks if it's cheaper or other untaxed dérivatives.
UK and french transaction tax is a Bonanza for the brokers btw, who make much more money on those than on equities (if their customers trade large lots at least or have enough cash available not to buy on margin"

I'm a fan neither of stamp tax nor cfds

IB offers DMA, I don't think many big traders or firms go through otc marked up share cfds to avoid the transaction taxes.

You can compare below the financing charges on CFDs with IB and margin rates, quite close, the problem is you have to pay from the 1st usd. The more margin you use, and the shorter you hold your positions, the least it impacts. It seems a very good solution for day traders in UK

https://www.interactivebrokers.com.hk/en/index.php?f=interest&p=schedule2

https://www.interactivebrokers.com.hk/en/index.php?f=interest&p=schedule2

I don't like the CFDs commission because there is a max commission (every 100k euros or so on shares plus rebates, hence when trading big lots (moc usually ) I sometimes pay several times more in commissions with CFDs than with shares). I would trade much more european stocks with lower commissions. Also the fact one has to trade CFDs or stocks depending on the european market and attached transaction tax makes it harder to reach a higher volume tier (IB calculates separately european stock and CFDs trades), which again increases commissions.
IB actually advertises cheaper commission with CFDs than with shares, which is true on small lots.

As of how their dma works, the price is the same as the underlying :

http://ibkb.interactivebrokers.com/article/1912

As of UK stamp tax, it's 0.5%, not 0.2, which make CFDs an even better alternative to stocks for short term trades.

 

[volpunter]

I hope I do not have to remind you that the world is not US and UK equity trading, lol.

What kind of argument in favour of shares is that anyway ?
Euro stocks are also "sujet to a commission that is a percentage of the size of the position for each trade "

UKstocks as well, with IB at least

 

[volpunter]

Of course there is not much of a problem in European or US markets with very few short sell restrictions. But there are more restrictions in markets such as Korea, HK, Singapore, Japan, ... pretty much those are the markets CFDs would be more interesting. Or think of the time when foreigners had limited access to China's A share market. You could however trade swaps (which is what CFDs exactly are) because the issuing bank was issued a QFII license and could therefore hedge its exposure. Again, I brought up short sell restrictions, and other issues to demonstrate that CFD by large majority are not identically priced than their underlying equity, I would actually claim they never are identically priced.

[QUOTE="volpunter, post: 4108839, member: 481655. Even DMA CFD trading only works in markets where the underlying can be easily bought/sold in the market at the same time the DMA order is submitted. That pretty much applies to very few markets, all markets with short-sell rules, for example, are excluded which are most equity markets. Are you sure you want to discuss this in detail?

With DMA the order is transmitted on the underlying order book and the customer is filled with CFDs only after the order is filled on the underlying. It doesn't matter if the order rests a long time.
Shorting works pretty well on UK and french markets, which were the ones mentionned here where to use CFDs rather than shares.
But if one can't short (can't borrow shares for instance) the underlying with IB, he probably won't be able to short CFDs[/QUOTE]

 

[luisHK]

I hope I do not have to remind you that the world is not US and UK equity trading, lol.

Yes, US, the world capital of euro trading. And we were talking about Korea.
Whatever mate. Good trading.

 

[volpunter]

You don't pay the spread when you buy and sell a CFD via DMA broker? So when you buy an AMZN CFD and sell it you do not pay the spread? Jeez, must be that brokers are really out there to benefit society, they earn nothing but take on all the risk and costs of trading. Interesting...sorry but I could not disagree more.

Also, there are more non DMA brokers out there that make markets in CFDs than those that offer DMA access. And whether they take advantage of newbies is one thing but has nothing really to do with the fact that CFDs are not equally priced as the underlying cash.

So, 5 basis points is not cheap enough for you? Hmm, maybe considering going lower frequency would be a solution...

luisHK pretty much explained it all. With a DMA broker you don't pay the spread and I would never use a non-DMA CFD broker as I think those are just bucket shops that take advantage of unknowledgable newbies. CFDs aren't part of the stamp tax either, making them the best instrument for equities.
I'd also love to trade European markets but the current commission rates are just too expensive. I wish they'd lower the fees to attract liquidity and with the added liquidity keep their net profits at the current level. I don't see it happening, sadly.

 

[marketsurfer]

my wife is one of the few experts on FTT's. We traveled the world several years ago presenting the research--- FTT's are proven to hurt market quality-- it will never happen---

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1980185

 

[volpunter]

you are a fast talker and retarded. On ignore. Goodness.

"you seem to be a fast talker rather than valuing facts and statistics.

"
I am a fast talker which is complete nonsense. you are a dancer who dances around reality who needs to learn basis mathematics. you got friends in hong kong who pull out a "100 basis points per day" and are glad to pay the stamp tax. somebody be kind to explain to him what the simple rate would be if you pulled only 50 basis points(.005) per trading session after paying the stamp tax. to keep it simple someone please tell him how much you have at the end of the year if you started with $100 on day 1.[/QUOTE]

 

[zdreg]

you are a fast talker and retarded. On ignore. Goodness.

"
I am a fast talker which is complete nonsense. you are a dancer who dances around reality who needs to learn basis mathematics. you got friends in hong kong who pull out a "100 basis points per day" and are glad to pay the stamp tax. somebody be kind to explain to him what the simple rate would be if you pulled only 50 basis points(.005) per trading session after paying the stamp tax. to keep it simple someone please tell him how much you have at the end of the year if you started with $100 on day 1.

[/QUOTE]
thanks for making my point. you can't do the numbers. therefore you sink to calling me names. where are the numbers? your posts are full of opinions but no numbers.
"you got friends in hong kong who pull out a "100 basis points per day" and are glad to pay the stamp tax. somebody be kind to explain to him what the simple rate would be if you pulled only 50 basis points(.005) per trading session after paying the stamp tax. to keep it simple someone please tell him how much you have at the end of the year if you started with $100 on day 1." you can't/unwillingly to do the calculation because your assertion that day traders can survive even a low ftt is an unrealistic possibility.

it is an old trick. when you can't win on the numbers/facts you attack the other person's character. not surprising at all.

how much is $1 at the end of the year when your hong kong "friends" net 50 basis per days. volpunt you can't/won't do the calculation because it would reveal
that your assertions of ftt not being the demise of active traders is a mirage on your part.