Would Bernie Sanders Kill Trading As We Know It?

[ajacobson]

A early tell would be if he floats Elizabeth Warren as a possible running mate. The financial community would become a prime target and a FTT would become a popular talking point.

 

[gkishot]

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%

I respectfully disagree.

From wiki: .025%–.5% tax on stocks, .025%–.1% tax on bonds and .005%–.02% on derivatives

My calculations are exact for unleveraged stocks.

 

[Frederick Foresight]

I believe the proposed tax amount is 0.005%

Yes, that is the proposed number I believe I saw floating around for derivatives. It would certainly be unfortunate if implemented. I can't seem to currently find the specifics on Sanders's site, whereas I remember seeing them there before. Could you please have a quick look and tell me if you come across it? Perhaps I'm going selectively blind.

 

[districttrader]

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.

If I don't understand, then please help me understand.

As to your claim that they steal cents off every retail order: why do you call it "stealing?" When you go to the barber, do you say that the barber was "stealing" from you when he asked for money after providing you a haircut? Or do you think "he provided a service and I paid for that service?" Likewise, HFTs are providing a service, should they not be paid for it?

As to your claim that when you really need liquidity, they disappear, what are you comparing to, floor traders? What initially happened in '87 with the NYSE specialists? (Hint: I'm open for business in XYZ 20 bid at 30) What happened to the ES in the flash crash? (Hint: 60 bid at 70 offer) So what is the difference?

 

[Frederick Foresight]

As to your claim that they steal cents off every retail order: why do you call it "stealing?" When you go to the barber, do you say that the barber was "stealing" from you when he asked for money after providing you a haircut? Or do you think "he provided a service and I paid for that service?" Likewise, HFTs are providing a service, should they not be paid for it?

Don't ever lose that sense of humor.

 

[ktm]

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%

That's the way all the unpopular taxes get implemented. The taxing authority starts with some microscopic amount and everyone says "we won't even notice that it's so small...no problem". Not only that, but it's hidden and never itemized - like our gasoline tax, and the airline taxes, and the special taxes on the regular taxes, and the blah blah blah....

Then it quietly gets increased via a buried line in a 2000 page bill in Congress that no one reads except the lobbiest that wrote it.

My problem with all of it, politically, economically and fundamentally - is that the gov't in the US is receiving more than adequate funds to run the country properly. Yet our politicians from both sides of the aisle (and up the middle) are largely predisposed to finding ways to take even more from us instead of showing real leadership by properly managing what they have.

 

[i am nobody]

For the futures even for the lower end of 0.005%, it adds up to 2.5% of position size. But since future traders are usually highly leveraged by factor of 10, this again amounts to 25% of their capital.

I think you are wrong.
If you trade 1 contract ES, the value of that contract is today about 1850*50=$92,500.
0.005% on $92,500 equals $4.625, or $9.25 per RT. If you use the minimum daytrade margin of $500, the cost represents 1.85%. I have no idea were you get your 25%?

 

[tommo]

I respectfully disagree.

From wiki: .025%–.5% tax on stocks, .025%–.1% tax on bonds and .005%–.02% on derivatives

My calculations are exact for unleveraged stocks.

For the futures even for the lower end of 0.005%, it adds up to 2.5% of position size. But since future traders are usually highly leveraged by factor of 10, this again amounts to 25% of their capital.

I don't understand the point you're making? Are you saying 25% of your capital is low??

I dont know about equities, never traded them, but 99% of day traders use leverage so to use an example on an unleveraged $1000 investment isnt really speaking to the impact it would have on the financial industry.

According to your interpretation what is your additional costs per 1 lot traded in a treasury future with a face value of $100,000?

I dont think the account size is relevent. You can trade a 1 lot with a $5000 account or a $1mill account. The account size doesnt come into the equation. ( not being facetious, maybe i have misinterpreted)

Yes, that is the proposed number I believe I saw floating around for derivatives. It would certainly be unfortunate if implemented. I can't seem to currently find the specifics on Sanders's site. Could you please have a quick look and tell me if you come across it? Perhaps I'm going selectively blind.

I can't see anything on his site about specifics (although i did read an article about 0.05% i may be wrong). But this isnt a new idea. It has been spoken about for years and if you take the average it is about 0.05%.

He is rumored to be pushing for 0.1% tax on all financial transactions http://dailycaller.com/2015/10/13/h...in-hood-financial-tax-simply-dont-hold-water/

 

[Frederick Foresight]

I can't see anything on his site about specifics (although i did read an article about 0.05% i may be wrong). But this isnt a new idea. It has been spoken about for years and if you take the average it is about 0.05%.

He is rumored to be pushing for 0.1% tax on all financial transactions http://dailycaller.com/2015/10/13/h...in-hood-financial-tax-simply-dont-hold-water/

0.005% on futures would be bad enough. Higher would definitely be a buzzkill. I like Sanders's ideas on a lot of issues, but FTT is not one of them. I don't think he would actually suggest 0.1% on all transactions. Sanders is a smart guy, whereas 0.1% on all transactions is patently absurd.

 

[i am nobody]

Documentationon FTT in Europe; will be similar to American FTT.
Prognoses say turnover in stocks and bonds will go -15%
Turnover in derivatives and financial bets will go -75%!!!
Annual tax revenues are estimated to be around EUR 30 to 35 billion.

http://ec.europa.eu/taxation_custom...er_taxes/financial_sector/ftt_under_ec_en.pdf

London will never accept a FTT.
"It's not a tax on bankers, it's a tax on jobs, on investment, on people's pensions," he said at a meeting of EU finance ministers on Tuesday. "That's why the United Kingdom does not want to be a part of it."

"If they seek to damage jobs and investment across the rest of Europe, then we are entitled to challenge that."

In a bad-tempered debate, Mr Osborne was scathing about the lack of details surrounding the proposed Financial Transaction tax (FTT) including the basic issue of which shares and derivatives would be covered by it and the territorial scope of the levy.