Would Bernie Sanders Kill Trading As We Know It?

[tommo]

Hi,

Im based in the UK so probably not up to speed as much as many of the US based people on the forums re: the US elections.

Looking at Bernie's policies though, things like a financial transaction tax would kill day trading as trading commissions would increase ten fold. A futures contract with a face value of 100k per 1 lot (fairly typical) you be an additional $5-$10 a round turn. So around $12 a round turn for discounted professional traders. Probably $15-$18 for retail traders.

This would eliminate all forms of spread trading and intraday trading as a viable option.

The lack of liquidity in the markets would be staggering. I won't go in to the damage this will cause to the US economy as a whole as institutions will find it far far harder to hedge exposure. Believe it or not.. futures markets arent just there as our play thing, they serve a vital hedging tool (over 98% of the largest 500 companies in the world use futures as a hedging tool) which will now lose all liquidity as short term traders find trading too expensive.

Then add in all the "Wall Street Taxes" and brokers and clearers will pass this on to investors. So not just day traders but fees will go up dramatically on your pension plans and mortgages and any other form of credit as hedging costs go through the roof.

Here in the UK we always look to America as a shining light of free markets and "go and get your dream" but this Bernie Sanders guy looks a really serious threat.

Ive been a prop trader in Europe here for 10 yrs. But i know there are guys that have been around the trading block for decades and decades. What your take on things?

Thanks

 

[i am nobody]

This would eliminate all forms of spread trading and intraday trading as a viable option.

I don't agree, I think a better statement would be: This would start a natural selection after which only the strong survive.
With the strong I mean real traders who make real moves, not jumping in and out for 1 or 2 ticks. People who can sit for 1 or more hours in a position and take real profits, not nickels and dimes. People for who the additional cost will not get out of proportion in relation to the generated profits. But it is clear that even these traders will face extra expenses, lowering their profits. Spreads probably will change too, become more expensive as liquidity will go down.
Might be a big problem for HFT too, but I don't know enough about HFT to judge that correctly.

 

[tommo]

With respect I think that's a limited view of the markets. If everyone was an intraday position trader the markets would be entirely different and lose their main purpose.

I've been a professional trader for almost a decade as I mentioned. And have yet to meet more than 1 or 2 guys that make money trading outrights for several hour long positions. A huge part of what hedgers and end users do in the markets (I'm talking producers of raw goods, mortgage companies etc etc) are based around spread trading. Hedging positions out along the curve in multiple asset classes.

I am as anti HFT as the next guy. But there are hell of a lot of 'real traders' that require liquid low cost markets.

Also, even if you are a fantastically profitable medium term trader. Work out how much you paid in commissions last year and multiply that by 10. If you're telling me that doesn't make a huge huge difference to your bottom line you have my absolute respect.

 

[i am nobody]

With respect I think that's a limited view of the markets. If everyone was an intraday position trader the markets would be entirely different and lose their main purpose.

I've been a professional trader for almost a decade as I mentioned. And have yet to meet more than 1 or 2 guys that make money trading outrights for several hour long positions. A huge part of what hedgers and end users do in the markets (I'm talking producers of raw goods, mortgage companies etc etc) are based around spread trading. Hedging positions out along the curve in multiple asset classes.

I am as anti HFT as the next guy. But there are hell of a lot of 'real traders' that require liquid low cost markets.

Also, even if you are a fantastically profitable medium term trader. Work out how much you paid in commissions last year and multiply that by 10. If you're telling me that doesn't make a huge huge difference to your bottom line you have my absolute respect.

I was speaking about daytrading. That's why I replied to a part of your posting only.
But for the rest I agree with you.
In general politicians have no clue about the financial markets. Even many people with an economical education have no idea how important a liquid shortterm market is. The only short term trading they should kill is HFT as it has no real value for the markets. They don't bring any real liquidity, they just steal everywhere small amounts from the people who provide the real liquidity.
From what I read it will increase cost but not by 10 fold. But I must admit that I did not follow this anymore for a long time. For futures they spoke about 0.01% in the country where I lived at that moment. Would be around 20$ RT. So 20$ less profit per trade.

 

[rmorse]

Hi,

Im based in the UK so probably not up to speed as much as many of the US based people on the forums re: the US elections.

Looking at Bernie's policies though, things like a financial transaction tax would kill day trading as trading commissions would increase ten fold. A futures contract with a face value of 100k per 1 lot (fairly typical) you be an additional $5-$10 a round turn. So around $12 a round turn for discounted professional traders. Probably $15-$18 for retail traders.

This would eliminate all forms of spread trading and intraday trading as a viable option.

The lack of liquidity in the markets would be staggering. I won't go in to the damage this will cause to the US economy as a whole as institutions will find it far far harder to hedge exposure. Believe it or not.. futures markets arent just there as our play thing, they serve a vital hedging tool (over 98% of the largest 500 companies in the world use futures as a hedging tool) which will now lose all liquidity as short term traders find trading too expensive.

Then add in all the "Wall Street Taxes" and brokers and clearers will pass this on to investors. So not just day traders but fees will go up dramatically on your pension plans and mortgages and any other form of credit as hedging costs go through the roof.

Here in the UK we always look to America as a shining light of free markets and "go and get your dream" but this Bernie Sanders guy looks a really serious threat.

Ive been a prop trader in Europe here for 10 yrs. But i know there are guys that have been around the trading block for decades and decades. What your take on things?

Thanks

Clearly his goal is to vilify ALL of "Wall Street" and penalize short term trading. Any business that benefits from trading will be harmed. On a positive side, this legislature will Never pass these taxes into law with this current mix of Democrats and Republicans.

 

[tommo]

I was speaking about daytrading. That's why I replied to a part of your posting only.
But for the rest I agree with you.
In general politicians have no clue about the financial markets. Even many people with an economical education have no idea how important a liquid shortterm market is. The only short term trading they should kill is HFT as it has no real value for the markets. They don't bring any real liquidity, they just steal everywhere small amounts from the people who provide the real liquidity.
From what I read it will increase cost but not by 10 fold. But I must admit that I did not follow this anymore for a long time. For futures they spoke about 0.01% in the country where I lived at that moment. Would be around 20$ RT. So 20$ less profit per trade.

Yup $20 a trade. So assume you are trading 10 times a day. That's an extra $200 a day off your income per contract traded!!

$4k a month/ $48k a year per contract traded in additional costs!

Industry would be destroyed.

But agree, HFT doesn't benefit many people other than HFT's but this policy will kill everyone

 

[districttrader]

Clearly his goal is to vilify ALL of "Wall Street" and penalize short term trading. Any business that benefits from trading will be harmed. On a positive side, this legislature will Never pass these taxes into law with this current mix of Democrats and Republicans.

I agree. I don't see this tax passing with Congress. Congress doesn't really pass alot of new legislation anymore; it can barely pass a budget bill.

I never have understood the vilification of HFTs. It seems to me that there is a great number of people who fundamentally misunderstand that HFTs help the retail customer. The average retail customer today has much greater access to the financial markets that he or she had 30 years ago.

 

[i am nobody]

The average retail customer today has much greater access to the financial markets that he or she had 30 years ago.

30 years ago HFT did not exist, so greater access has nothing to do with HFT.
30 years ago retail customers had no realtime access to the markets, there were bearly any computers used and prices for realtime feed was very expensive, internet did not exist. These changes are responsible for the greater access, not HFT. In 1990 I paid about 2000$ a month for realtime forex. Now it is almost for free compared with 1990.

 

[rmorse]

I don't normally post my political opinions on ET. So this will be the 1st time.

I’m so tired of politicians creating laws they don’t understand. Creating regulations they don’t understand. Promoting business through laws they don’t understand. Then, blaming a capitalist society for trying to make money with those laws they’ve created. It also annoys me when they group everyone together that works on “Wall Street.” Not all of us sold CDSs and CDOs. Not all of us broke the law. Many of us are hardworking people that risk our capital or provide an important service to their clients. Penalizing “Wall Street” is hurting the hard working people that provide services there and does not hurt the large banks and brokers. To them, it’s just a fine.

Bob

 

[tommo]

I don't normally post my political opinions on ET. So this will be the 1st time.

I’m so tired of politicians creating laws they don’t understand. Creating regulations they don’t understand. Promoting business through laws they don’t understand. Then, blaming a capitalist society for trying to make money with those laws they’ve created. It also annoys me when they group everyone together that works on “Wall Street.” Not all of us sold CDSs and CDOs. Not all of us broke the law. Many of us are hardworking people that risk our capital or provide an important service to their clients. Penalizing “Wall Street” is hurting the hard working people that provide services there and does not hurt the large banks and brokers. To them, it’s just a fine.

Bob

Well said Bob!