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Transaction Tax Bill has now been introduced
- Thread starter Bullet
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Quote from Strath:
If worst came to the worst, there are still alternatives to completely avoid paying the tax altogether.
The alternatives are, trade other markets in other countries.
Take Stocks for example. There used to be stamp duties or a transaction tax in Australia and this was abolished 4-5 years ago. So if the US introduces this tax, US traders will be more than welcome to the Australian Market.
With futures, instead of trading ES NQ and TY, why not trade the Dax, SMI, Stoxx50, Bunds, Footsie, Cac, Australian Spi, and Futures in Asia where there are no transaction taxes.
Congress should be alerted to the fact that at the present time, there are thousands of traders outside the US who trade US Futures and Stocks and Options. Be assured, that if this tax is introduced, we will completely abandon any trading in the US. That is a promise!
For US traders, if this tax is introduced, the only downside is that they will have to adjust their sleeping patterns so that they can trade other markets around the world where there are no transaction taxes!
I think if this happens, then it will be a global G8 or 20 plan to stop what you suggest.
After all all politicans want to blame 'evil' speculators for their problems. (look at their impact on the CDO market, the oil price, shorting bank stocks etc etc..........)
You only have to look at Trichet's speech this morning - "we are confident we can end the culture of short termism" etc.
However destroying trading (as a 0.25% tax surely would) would cost them a huge amount as there are so many jobs related to it. And in the UK housing, certainly in the Cities, would tank even further. The other aspect which makes me think (hope?) it won't happen is that a place like Dubai may then set themselves up as the worlds financial centre- especially as their oil reserves are getting low.
The only good thing about being English is that we have a good chance of a Conservative Government in just over a year's time.The leader wants 'no more debt' so has almost the beginnings of an Austrian Economics understanding of the causes of this situation.
Lucky it refers to any contract under 'exclusive' jurisdiction of the CFTC as I was a little worried I'd have to say goodbye to US Brokerages as a whole.
Lucky it refers to any contract under 'exclusive' jurisdiction of the CFTC as I was a little worried I'd have to say goodbye to US Brokerages as a whole.
... as increases in mutual fund expenses. It is even possible to estimate losses to an average American investor. Take an emerging European country, Poland, where a memebership fee charged to exchange members (broker-dealers) is a 'mere' 3 basis points (see [1]), i.e. at the level of American brokerage commissions charged to individuals ([2]). By comparison, NYSE transaction fees charged to member firms are 600 times lower (half of a thousandth of a basis point, see [3]).Quote from gkishot:
The taxes on transactions [..] will be passed to the shareholders.
As a result of such transaction fees charged at the source (by the monopolistic exchange), Polish mutual fund companies have to set up their own broker-dealer companies, because otherwise their costs would be prohibitive. They would have to pay 0.18% brokerage commissions (institutional [4], because retail ones start from 0.35%, see [5,6], resulting in losses for 100% of retail brokerage customers ([7]) and great popularity of Forex trading - unregulated, extremely highly margined - with predictable results for customer performance).
Despite having zero commissions, the 3 basis points of exchange membership fee (coupled with another 1 bp of regulatory fee) is sufficient to translate into large expenses passed onto the fund investors. The median total expense ratio of a Polish equity mutual fund is 4% ([8]). For comparison, according to a report from Fitzrovia and Lipper, the average total expense ratio for US equity mutual funds, weighted by assets, is just 0.92% ([9]), while UK investors have to pay almost 2 times more (1.68%), partially because UK-domiciled funds have to pay the infamous 0.50% transaction tax ('Stamp Duty Reserve Tax', which caused a fifth of funds to migrate to Ireland and Luxembourg, see [10]). This is also likely caused by the loss of market efficiency in the form of wider bid/ask spreads (hidden transaction costs) typically accompanying declines in market volume. And it has been shown that stock market volume is highly sensitive to the size of the transactions tax: increasing stamp duty by 1/3 decreases volume also by 1/3 (which will also make any tax revenue forecasts greately overestimated, see [11]). Once retail traders are decimated by the tax, bid/ask spread widening will affect US markets *even* if mutual funds are exempt from the proposed transactions tax. Only market making institutions (investment banks, hedge funds, broker-dealers) will benefit from this tax (if they are exempt) - taxpayers will suffer net losses once wider spreads are factored into mutual fund expenses. Moreover, following the decrease in stock market participation from individual traders, stock market volatility will increase even further, because with fewer liquidity-providing traders with differing opinions, price shocks ('crashes') become more pronounced and less easily absorbed [see 11].
To see that high mutual fund expenses are not due to lack of competition, it is sufficient to compare them with 'one decision' investors, i.e. Polish pension funds, which have negligible asset turnover (having predictable redemptions and having been set up relatively recently). Despite having oligopoly powers, annual management fees (i.e. proxy for expense ratios) charged by pension funds range from 0.18% to 0.54% (see [12]), i.e. 7-20 times *less* than mutual funds (3.9%, see [7]), which have to rebalance their portfolios periodically and meet customer-driven redemptions.
Please use this material freely in your lobbying. I've done my best.
0s
[1] 0.033% or 0.00033 or 3.3 bp, source: Warsaw Stock Exchange membership fees: http://www.gpw.pl/zrodla/ogieldzie/kodeks/pdf/Oplaty_Czlonkowie.pdf
[2] Interactive Brokers commissions schedule, North America, bundled: http://www.interactivebrokers.com/en/accounts/fees/commission.php
[3] $0.000275 per share, so assuming a $50 share, gives 0.0000055 or 0.0055 of a basis point; see: NYSE drops fee caps and specialist commissions: http://www.marketwatch.com/news/story/nyse-uncaps-monthly-fees-members/story.aspx?guid={08FB7E20-3762-4651-90C5-3CB4FF89CC86}
[4] Commissions paid by a certain Polish fund (O..a) before setting up their own broker-dealer
[5] Brokers ranking by Rzeczpospolita magazine: http://www.rzeczpospolita.pl/dodatki/pieniadze_070222/pieniadze_a_1.html
[6] Amerbrokers commission schedule: http://www.amerbrokers.pl/plik.php?id=2
[7] As I was told (not exactly in confidence) by a CEO of a certain brokerage (P..a)
[8] Mutual fund expenses - Polish equity funds (the three columns contain: maximum load, total expense ratio, annual management fee): http://fundusze.onet.pl/0,3,3,flista.html
[9] Total Expense Ratios - the hidden costs eating away at your investments: http://uk.biz.yahoo.com/28092005/389/total-expense-ratios-hidden-costs-eating-investments.html
[10] Abolish SDRT to stop fund exodus, says IMA: http://www.highbeam.com/doc/1G1-169954808.html
[11] Baltagi, Li and Li, 2006. Transaction tax and stock market behavior: evidence from an emerging market. Empirical Economics 31(2), 393-408. URL: http://www.springerlink.com/content/d721857t410764nh/
[12] Polish pension fund charges: http://www.ofe.135.pl/index.php/tag/oplata-za-zarzadzanie
Quote from RedDuke:
You are wrong. If this tax goes through, they would make US citizens pay regardless which exchange you trade at.
I'm afraid you're right
one thing they might do, is exempt trading prop shops, effectively forcing independednts to 'get a pimp'
this is EXACTLY what they did to computer contractors with the IRS 1706 law - it was pure harrassment - the only reason people dont talk much about it, is because the much larger shoe of H-1b was dropped on them, making the prior harrassement seem like nothing
from that point on, no matter what you did, no matter how honestly you paid your taxes, you couldnt be sure that the IRS wouldnt haul you in, 'reclassify' you from independent to employee, and fine the hell out of both you and the client. very hard to work 1099 after that - most people had to work w2 for some shop that did noting but payroll for a 30% cut - maybe some douche bag would waste an hour of your time every 3 months 'taking you to lucnh' for that 30 percent of your pay
so much for 'freedom'
the law was practically written by Andersen Consulting (Arthur Andersen) so that nobody got past the bridge without paying them and their ilk a toll
a HUGE toll
the government is capable of making your life so miserable, that you will eventually give up and do something else - once they start in on a group, it never ends. You'd think every tech worker was guilty of a felony
but after having them offshoring manufacturing, outsourcing and insourcing service jobs and outlawing trading, hard to tell what 'something else' that would be, in a depression
congress is definately winning the war on the citizen
Man, I hate these people
Quote from tomahawk:
Listening to governor Paterson talking on cnbc this morning about New York State's dire financial condition, it would seem that the hit to Wall Street from this tax would just about send NY over the edge.
Very good point there. Also Obama is from Chicago and he just got served yesterday on CNBC in his own city.
Please sign this petition if you have not already done so.
http://www.rallycongress.com/no2tradertax/1536/
Quote from swtrader:
One issue that hasnt been touched on (or maybe i didnt see it in this looooong thread), is that the dow just closed last month under the 200 month avg, adn today closed below the 2003 lows.
There's never been a worse time to tamper with the complexion of the market in such a volume reducing fashion - only the 'head' of the upside down head/shoulders remains below today's close.
below that level, there's practically nothing for support until 5800, then 4000 (96 and 94 highs)
even the discussion of such a proposal weakens what little support there is below
this is literally the worst time ever to bring this up
if it drops to the bottom, then they repeal or drop discussion of it, the technical damage will already be done
I still think this is THE issue
remember the whole point of TARP was (a foolish attempt) to support the market
this proposal kicks the chair out from underneith it