tradersboredom
Guest
this could be the last days of futures trading if this passes because the value of futures for even on contract is high. commissions would be like $150 per contract
or $300 round trip.
or $300 round trip.
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Transaction Tax Bill has now been introduced
- Thread starter Bullet
- Start date
tradersboredom
Guest
IB is futures and options.
IB is gone too since it's the value of futures.
forex only remaining trading platform for daytraders.
IB is gone too since it's the value of futures.
forex only remaining trading platform for daytraders.
Quote from TopTrader8:
Plain and Simple.
If you want to crash the financials of every discount broker out there then pass this bill.
The only discount broker that will remain standing is probably IB.
Tons of daily transaction will come to a halt and so good buy Ameritrade, Etrade, Schwab or whomever.
Think About It.
tradersboredom
Guest
bascially all speculator volume is wiped out
only real hedgers like companies or farmers will be hedging or transacting on futures with their brokers like the old days of futures. volume was so small only 2 hour s of floor trading
only real hedgers like companies or farmers will be hedging or transacting on futures with their brokers like the old days of futures. volume was so small only 2 hour s of floor trading
Quote from TopTrader8:
Plain and Simple.
If you want to crash the financials of every discount broker out there then pass this bill.
The only discount broker that will remain standing is probably IB.
Tons of daily transaction will come to a halt and so good buy Ameritrade, Etrade, Schwab or whomever.
Think About It.
Raskolnikov , I don't day trade .I buy and hold ,it came down to this , you can not hold a stock overnight anymore , it's not
supposed to be this way , so FCK you too my friend.
supposed to be this way , so FCK you too my friend.
Quote from tickmagnet:
Raskolnikov , I don't day trade .I buy and hold ,it came down to this , you can not hold a stock overnight anymore , it's not
supposed to be this way , so FCK you too my friend. [/QUOTE
how did that last decade treat you, what people dont understand about investing is that america stopped the free lunches of old. why dont you ask yourself why hasnt microsoft grown too much over the last 10 years. when something gets too big its very hard to have continous growth rates that spell massive windfalls. that is where the us is in this stage of the game. we need to create something that is going to change the course of time. the high tech and the internet did this hence the appreciation of the market from the 80s through the 90s. until something starts a brewing for something big the buy and hold investor better start to become one hell of a stock picker. oh and by the way this has nothing to do with being a daytrader or short term investor who have no bearing on where a stock is gonna be 5 years from now.
Title: A Technical Analysis of Impact of Proposed Transaction Tax
-----------------------------------------------------------------
Summary
=======
Want to know some detailed and interesting numbers. Please read on.
In short, the market will shrink 83.5% to a level of 16.5% of total
average trading volume. The proposed transaction tax total were to be
27.04 billion (minus losing capital gain, and others) instead of
naively expected 160 billion per year after considering the shrinking
volume. Consider losing capital gain and losing businesses, the
actual total tax increase from the market were close to zero or
negative. (UK actually already proved this result by seeing its total
tax amount plat (plus problems) after introduced the transaction
tax. ) If this tax were to pass, for short term traders, they were
out. Even the so so investors were to be hit hard as well. This is
what the "negligible" transaction tax will bring us. Please read more
if you want to know some detail numbers and why this can be concluded
from a different point of view as compared to many of you see the same
results from various angles.
Market data
===========
Total stocks considered: all major stocks at NYSE/NASDAQ/AMEX
5033 syms (simply because I have market data for all these stocks).
6 N/A
21 Conglomerates
111 Utilities
289 Industrial
394 Consumer
459 Basic
503 Healthcare
848 Services
898 Technology
1504 Financial
Key numbers and Analysis
========================
This analysis is based on market data as of the market close on Feb
18, 2009.
Total current market cap (considering the 5033 stocks only):
12513408098648.40 = 12.51 trillion
Total 20-day-average trading amount per day ( total sum of average
trading volume multiplied by closing price): 130071335268.84 =
130.07 billion per day
Total trading days for 2009: 252
20-day-average transaction tax per day if it were passed:
650356676.34 = 650.34 million per day
Transaction tax for 2009 assuming the market does not shrink:
163889882438.73 = 163.88 billion per year
Ttransaction tax for 2009 considering the factor of expected market
shrinking: 27.04 billion per year.
DOW index from Jan 4, 1960 to Feb 18, 2009 from 679.06 to 7555.63, up
1012.66%, equivalent to accumulative growth of 5.0399% per year.
The average total market share turnover rate is 261.94%, that means,
all the shares (this number will be much higher if considering only
the outstanding shares).
The current average trading cost (assume just 0.05%, that is, you pay only $5
dollars to sell or sell 1000 shares of a stock at price of $10.0 per
share). So, a round-trade, the cost is around 0.1% already.
Market turnover rate: 2.69, that is, 269% per year, that is the
market hold shares for average of around 4.5 months. (this number
will be much bigger if considering only outstanding shares).
A normal average market investor/trader assuming he does just the
average turnover rate of 2.69 times per year. His average market
performance would be 5.0399% - 0.1% * 2.69 = 4.77% per year (before
capital gain tax) since 1960. This is the number without the proposed
transaction tax.
If the transaction tax were added, assuming the market ignores this
so called "negligible" tax. The market (investors, not short term
day-traders) should accept the average yearly return of 5.0399% -
(0.1% + 0.5%) * 2.69 = 3.42%. The market is smart. It will adjust
itself to an acceptable level to make a yearly return of closing to
5%. Assuming 4.5 is an acceptable level. Then, the market has to
decrease its turnover rate (that is liquidity) to a level which will
make investors (not day traders or speculators) happy (probably not)
at 4.5% yearly return. Calculating this new equation, we get the
turnover rate should be at 89.9% per year. That means the average
investor needs to hold his stocks for over one year and one month as
compared to the current 4.5 months for an average yearly return of
4.77%. This is equivalent to the average market total trading volume
be shrunk to 33% of the current level. If all short term traders are
gone, this number will be much much smaller. If the market does not
accept 4.5% return, the turnover rate should be even lower. I would
put the trading volume be shrunk, by 100% - 33%/2 = 83.5%,
reasonably, to 33%/2 = 16.5%. So, the proposed transaction tax were
be shrunk to 27.04 billion.
Impact on short-term traders
============================
Please read more why all short-term traders should leave the market.
It will be funny to see how big the impact would be for an average
short term trader. Here I am using the turnover rate of 252, that is,
using all his account buying power every day, no overnight
holdings. His cost per year was 252 * 0.1% = 25.2% without transaction
tax. Many short term traders can survive with this number. 25.2% of
commissions per year is just fine for a good trader while most day
traders see this a big burden already. For a very exceptional trader,
if his performance is more than 252 * 0.6% = 151.2% per year. He may
still survive. Remember this does not assume any leverage. If this
same trader uses 1:4 leverage, his performance should be yearly
604.8% to keep positive. 1:4 leverage is a quite small number. I
believe many traders are using a much bigger leverage. As far as I
know, I do see any of elite-traders can reach such enormous
performance, even neke (the guy who turned his account from around
140K to almost half million in year 2008, would be a loser and were
to owe a sizable transaction tax at the year end.) So, a day trader,
if he is not stupid and is not yet proved to be very very
exceptional, should not be surprised to loss money year after year
once this tax were added into law. No solution to get around. It is
wise to simply stop trading US markets.
How about swing traders? I can calculate more numbers for this group,
but their situation will be very much similar to day traders. The
more they trade, the more they pay, the more they lose.
Impact on long-term investors
=============================
The strategy of buy and hold proves not always working, so average
investors should not be in the market. But this group of traders,
they are still traders anyway, they have to follow this strategy
blindly. If they do trades, they have to trade between themselves
without the help of short-term traders to provide liquidity they need
desperately when they see something to happen in the horizon. So, we
will see only the real investors who buy and hold, for a period of at
least one year, so as to only charge a negligible 0.5% for a round
trade, (better hold for ever to totally avoid this tax) to earn
dividend. What a market it would be! I will see a market consisting
of only real investors and, of course, real gamblers who does not
care about transaction tax. This is a market low liquidity and high
volatile. If the sole purpose of this transaction tax bill is this
plus a huge unexpected blow to damage the current and the future US
economy. Then the goal is done. The market is done. Congratulation
for people who support this bill.
PS. I just talked with a MBTrading guy. He looks never heard of this tax
yet. After I explained to him. I believe he started worrying,
probably for the future of his firm, his job, etc. Here is his
response: "It is terrible idea I think, and you're right most brokers
will probably shut their business. The whole world trades the US
market for it's liquidity. People will look to other markets outside
US if it were to pass ...".
I am a technical person. I would be very much interested to do more
analysis, for free, if you get an idea to evaluate the impact of this tax by
actual numbers.
Thanks,
aqtrader
-----------------------------------------------------------------
Summary
=======
Want to know some detailed and interesting numbers. Please read on.
In short, the market will shrink 83.5% to a level of 16.5% of total
average trading volume. The proposed transaction tax total were to be
27.04 billion (minus losing capital gain, and others) instead of
naively expected 160 billion per year after considering the shrinking
volume. Consider losing capital gain and losing businesses, the
actual total tax increase from the market were close to zero or
negative. (UK actually already proved this result by seeing its total
tax amount plat (plus problems) after introduced the transaction
tax. ) If this tax were to pass, for short term traders, they were
out. Even the so so investors were to be hit hard as well. This is
what the "negligible" transaction tax will bring us. Please read more
if you want to know some detail numbers and why this can be concluded
from a different point of view as compared to many of you see the same
results from various angles.
Market data
===========
Total stocks considered: all major stocks at NYSE/NASDAQ/AMEX
5033 syms (simply because I have market data for all these stocks).
6 N/A
21 Conglomerates
111 Utilities
289 Industrial
394 Consumer
459 Basic
503 Healthcare
848 Services
898 Technology
1504 Financial
Key numbers and Analysis
========================
This analysis is based on market data as of the market close on Feb
18, 2009.
Total current market cap (considering the 5033 stocks only):
12513408098648.40 = 12.51 trillion
Total 20-day-average trading amount per day ( total sum of average
trading volume multiplied by closing price): 130071335268.84 =
130.07 billion per day
Total trading days for 2009: 252
20-day-average transaction tax per day if it were passed:
650356676.34 = 650.34 million per day
Transaction tax for 2009 assuming the market does not shrink:
163889882438.73 = 163.88 billion per year
Ttransaction tax for 2009 considering the factor of expected market
shrinking: 27.04 billion per year.
DOW index from Jan 4, 1960 to Feb 18, 2009 from 679.06 to 7555.63, up
1012.66%, equivalent to accumulative growth of 5.0399% per year.
The average total market share turnover rate is 261.94%, that means,
all the shares (this number will be much higher if considering only
the outstanding shares).
The current average trading cost (assume just 0.05%, that is, you pay only $5
dollars to sell or sell 1000 shares of a stock at price of $10.0 per
share). So, a round-trade, the cost is around 0.1% already.
Market turnover rate: 2.69, that is, 269% per year, that is the
market hold shares for average of around 4.5 months. (this number
will be much bigger if considering only outstanding shares).
A normal average market investor/trader assuming he does just the
average turnover rate of 2.69 times per year. His average market
performance would be 5.0399% - 0.1% * 2.69 = 4.77% per year (before
capital gain tax) since 1960. This is the number without the proposed
transaction tax.
If the transaction tax were added, assuming the market ignores this
so called "negligible" tax. The market (investors, not short term
day-traders) should accept the average yearly return of 5.0399% -
(0.1% + 0.5%) * 2.69 = 3.42%. The market is smart. It will adjust
itself to an acceptable level to make a yearly return of closing to
5%. Assuming 4.5 is an acceptable level. Then, the market has to
decrease its turnover rate (that is liquidity) to a level which will
make investors (not day traders or speculators) happy (probably not)
at 4.5% yearly return. Calculating this new equation, we get the
turnover rate should be at 89.9% per year. That means the average
investor needs to hold his stocks for over one year and one month as
compared to the current 4.5 months for an average yearly return of
4.77%. This is equivalent to the average market total trading volume
be shrunk to 33% of the current level. If all short term traders are
gone, this number will be much much smaller. If the market does not
accept 4.5% return, the turnover rate should be even lower. I would
put the trading volume be shrunk, by 100% - 33%/2 = 83.5%,
reasonably, to 33%/2 = 16.5%. So, the proposed transaction tax were
be shrunk to 27.04 billion.
Impact on short-term traders
============================
Please read more why all short-term traders should leave the market.
It will be funny to see how big the impact would be for an average
short term trader. Here I am using the turnover rate of 252, that is,
using all his account buying power every day, no overnight
holdings. His cost per year was 252 * 0.1% = 25.2% without transaction
tax. Many short term traders can survive with this number. 25.2% of
commissions per year is just fine for a good trader while most day
traders see this a big burden already. For a very exceptional trader,
if his performance is more than 252 * 0.6% = 151.2% per year. He may
still survive. Remember this does not assume any leverage. If this
same trader uses 1:4 leverage, his performance should be yearly
604.8% to keep positive. 1:4 leverage is a quite small number. I
believe many traders are using a much bigger leverage. As far as I
know, I do see any of elite-traders can reach such enormous
performance, even neke (the guy who turned his account from around
140K to almost half million in year 2008, would be a loser and were
to owe a sizable transaction tax at the year end.) So, a day trader,
if he is not stupid and is not yet proved to be very very
exceptional, should not be surprised to loss money year after year
once this tax were added into law. No solution to get around. It is
wise to simply stop trading US markets.
How about swing traders? I can calculate more numbers for this group,
but their situation will be very much similar to day traders. The
more they trade, the more they pay, the more they lose.
Impact on long-term investors
=============================
The strategy of buy and hold proves not always working, so average
investors should not be in the market. But this group of traders,
they are still traders anyway, they have to follow this strategy
blindly. If they do trades, they have to trade between themselves
without the help of short-term traders to provide liquidity they need
desperately when they see something to happen in the horizon. So, we
will see only the real investors who buy and hold, for a period of at
least one year, so as to only charge a negligible 0.5% for a round
trade, (better hold for ever to totally avoid this tax) to earn
dividend. What a market it would be! I will see a market consisting
of only real investors and, of course, real gamblers who does not
care about transaction tax. This is a market low liquidity and high
volatile. If the sole purpose of this transaction tax bill is this
plus a huge unexpected blow to damage the current and the future US
economy. Then the goal is done. The market is done. Congratulation
for people who support this bill.
PS. I just talked with a MBTrading guy. He looks never heard of this tax
yet. After I explained to him. I believe he started worrying,
probably for the future of his firm, his job, etc. Here is his
response: "It is terrible idea I think, and you're right most brokers
will probably shut their business. The whole world trades the US
market for it's liquidity. People will look to other markets outside
US if it were to pass ...".
I am a technical person. I would be very much interested to do more
analysis, for free, if you get an idea to evaluate the impact of this tax by
actual numbers.
Thanks,
aqtrader
Attachments
Quote from cubsguy81:
Peter DeFazio has sponsored 180 bills since Feb 4, 1991. of which 161 haven't made it out of committee and 10 were successfully enacted.
http://www.govtrack.us/congress/person.xpd?id=400100
I am wondering how many times Defazio has sponsored a transaction tax bill in the past? His previous attempt (HR 7125) never made it out of committee so he had to reintroduce the bill for the new session of congress. I'm sure he's brought forth these bills in the past and they have crashed and burned.
-Guru
http://www.rallycongress.com/no2tradertax/1536/tell-congres-to-block-trader-tax/
Easy way to email your Senators!
Easy way to email your Senators!