I completely agree with you that a FTT is a terrible idea.
Would Bernie Sanders Kill Trading As We Know It?
- Thread starter tommo
- Start date
I completely agree with you that a FTT is a terrible idea.
Bernie will need to stand in line. We will first have a female president, a hispanic president, an Asian president, a female-hispanic president, a gay male president, a female lesbian president, a transgender president, and then, just maybe, a 73-year-old left-wing socialist Jewish president. But even then, I wouldn't count on it.
I love Bernie. But his time and space was shouting from the library steps at Columbia or Berkeley in 1972.
(Later, he went home with a skinny blond coed, enjoyed a fine joint of Panama Red while listening to Abbey Road, and fell asleep dreaming of someday becoming President of the United States and finally ending the War in Vietnam.)
God Bless Bernie.
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Although I'm not a fan of FTT, I think that's an overstatement.
How so? For an average day trader trading around 10 times a day it will add between $100 and $200 a day to your commissions. I dont know any traders that can handle an extra 500-1000 dollars a week for every 1 lot they trade?
But you can be sure that the lobbyists who pushed for the regulations that precipitated the crisis in 2008 had a fairly good understanding of what they were asking for. Government would not have relaxed useful regulations of its own accord. So I agree that regulations and their implications should be well understood by those passing them.
I suppose one realistic scenario is that certain players will gain exemptions and retail will trade CFDs with them (those who legally can). This is what happened in UK.
Then you don't understand HFT. They steal cents off every retail order and when you really need liquidity, they disappear as they've done multiple times now.
HFT went big after 2006, are you saying we didn't have access in let's say 2002-2006? Real liquidity is actually down.
What you're saying is "without ExxonMobil, we wouldn't have cars", there is no connection.
Then you don't understand HFT. They steal cents off every retail order and when you really need liquidity, they disappear as they've done multiple times now.
HFT went big after 2006, are you saying we didn't have access in let's say 2002-2006? Real liquidity is actually down.
What you're saying is "without ExxonMobil, we wouldn't have cars", there is no connection.
Personally i would favor HFT's being penalised and leaving the market place. Lets face it, we want a market that is a level playing field and HFT's do distort the markets for a lot of point and click traders. But a FTT would kill off just as many point and click traders as it would HFT's. Its like burning your house down because you need a new boiler. HFT's are just a part of a complex ecosystem.
Question is what is a good way to discourage HFT's. Id argue going after the technology is the key issue. There should be a "speed limit" on orders. If someone gets 90% of the profits being 100 miliseconds faster that seems an uneven playing field.
As I noted earlier, I'm not a fan of FTT, and it would likely change the manner in which many of us would trade. But I don't think it would necessarily kill intraday trading. That was my only point.
I don't precisely remember the proposed numbers, so I went to the Sanders site to look for them. I can no longer find the proposed tax figures, only the idea of the tax itself. Either I didn't look carefully enough, or maybe he's reworking the numbers.
In any event, the idea of FTT is not unprecedented, as you know. Even the US had an FTT in the past:
https://en.wikipedia.org/wiki/Financial_transaction_tax
I'll tell you what I would like, though. Regulation to limit the undue advantages of HFTs. That is an existing tax on the rest of us. And if we are unfortunate enough to have an FTT bestowed upon us, at least take a bit of comfort knowing that it will likely hurt HFTs much more.
With let's say 0.5% transaction tax, 1 round trip a day and $1000 of capital,
the FFT = $1000 * 2 * 0.005 * 250 trading days a year = $250.
This is 25% of capital goes to taxes before any profits are made. I don't believe there are many traders that make consistently way above 25% a year. Even leverage is not going to help.
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That isnt how it works. It works on the face value of the contract you are trading. So you trade a 1 lot futures contract in bonds has a face value of $100,000 so you pay 0.05% of $100,000 every time you trade.
I believe the proposed tax amount is 0.005%