The Transaction Tax Is Harmful

The 23 year old illegal alien driving the new Lincoln Navigator with brand new 22’s “owns” a condominium and small ranch on the other side of town, he has two children. Unmarried. He’s a Dishwasher at a local nationally franchised American eatery, quality one notch north of McDonalds. He is not independently wealthy. He is not a crack dealer. He’s not renting the condo.

Transaction taxes would destroy liquidity and drastically widen spreads.  It would make it impossible to be a liquidity provider.  Securities would then be easily controlled by specialists that would rape the spread.

90% of daytraders will lose money. Why bother? Tax everyone to death.

We got the bears to thank, when they tried to destroy the financial system. We get new rules every time that happens.

The real tax to consumers is the price of supporting the sell side market making companies. These traders get paid way to much to match orders. One day the buy side will grow a pair, make their own decisions and take the blame for when things go wrong. And ETN's will replace all the over priced sell side market making experts.....oh my bad sorry Mr Blanketfine, I forgot you employees are paid so much because they are the most productive

I'm usually pro-taxing the big boys but not in this scenario. DUMBASSES who support this tax: THE BIG BOYS WILL LEAVE. This tax will flop. Finance is international. They will go somewhere where they won't get taxed. Liquidity here will dry up, spreads will increase, volatility will increase and the US markets will generally get a whole lot less stable. How are you going to be able to sell that stock who just had a horrible earnings report when everyone else is selling and there are no short term traders to buy it from you. That will fuck you, me, and everyone else who is not a big borderless fund/IB. That will make balancing your retirement portfolios more expensive, ie. this tax will get passed on to the little guys through increased transaction costs. Everyone seems to take for granted the ease with which you can buy and sell stock. This is a retarded way to get back at wall street. How are you going to collect taxes from transactions that cease to exist?

So long as Tyler Durden is free to tell the truth,

there is hope. A 1% temporary TT could replace

all other taxes with a spending freeze. Keynes

proposed the TT to stop gambling and encourage

productive enterprise. Aristotle, David Ricardo,

Adam Smith, JFK and Reagan noted lower tax

rates increased tax revenues and grew the

economy. The time for the 1% Temporary TT

has come. After it proves itself it can be

reduced to one mil...

http://www.jubileeprosperity.com/

I used to frequent the Economist comments section quite a lot until it became obvious that governments were hiring people to spew propaganda. They quickly digressed into the heap of shit they are now. Log on there an look at any of the stories that talk about Russian politics and you'll see what I mean.

Anyway, I'm beginning to think Nancy Pelosi has done the same with ZH. See on the left side there? See any commonality with the suggested reading? Free markets, low taxes, private property.

http://www.fairtax.org :
Because a consumption tax is a lot less regressive than a dead planet. (HR25, S 296)

This "transaction tax" is inappropriate because it is too specific (as is the cap and trade idea). The rich get richer (anyone checked government salaries lately?) because the poor work for them and give them money. The decisions about our economy are made at the checkout, and that's where the taxes need to be applied if people are to make informed decisions (whether or not they are rational is yet to be seen) with all of their money in hand.

The income tax system simply puts accountants in charge of everything through complexity and obfuscation, just as the law puts lawyers in charge, and we end up with cops selling speeding tickets at the optimal revenue-generating price, rather than deterring crime. When the choices are pre-made and buried by accounting practices, how can we say that there is any "intention" of the "free" market?

I don't live in the USA but I have a trading account there.

If I was taxed on my trades, I would close down my trading account INSTANTLY !

simple, fill to kill ratio, like any clearing firm

There should be no tax increases period....

At a time whereby raising capital is very important to the economy....one does not tax capital.....

More than a third of the economy purchasing power has been eliminated....

The govt. cannot upsize.....it must downsize in a very big way....

....................................

Moreover....the tax structure must be changed completely....

Over 50% of US citizens do not pay any income tax....

The govt. could decide to tax 100% of the upper class income and revenues would still fall short....

.................................

The US must replace individual wealth....but cannot do this
by simply printing monopoly money....or else there would be no poor nations....

What has to happen is that asset valuatios ....the overall cumulative valuation of businesses must add up to more than what was lost....

The best mechanism for this is common stock....whether it be just an interested party....or a meritorial employee....a person should have the liberty to buy or sell ...on an electronic direct access exchange....the stocks of their choice.....worldwide....in the currency and language of hteir choice.....At a cost of no more than 20 cents per 100 shares....as I currently pay....

There should be no taxes of any kind on stocks....by any country in the name of efficient capital....

The exchanges need to be defragmented and to be made honest by all buyers and sellers....no matter how large or small....are first come first served....

RETAIL traders have largely replaced market makers because of ecns and direct access efficiencies....

A T Tax would eliminate trading efficiencies and therefore this whole innovative RETAIL market making segment......

Through a T Tax ....as has been in every country where it was tried....the market makers ....owned by the very banks at whom the T Tax is directed......were and will be exempt from the T Tax....

Only the RETAIL segment would pay any tax....

And as a result ....the bid ask spread would widen as much as 5 to 10%....thereby increasing the actual cost of retail traders by the same amounts.....while gifting the spread to the very market maker banks that the T Tax is supposedly aimed at....

The T Tax will not tax the big banks....as they are the market makers....

...........................................

What should be happening is to make the exchanges far more efficient and retail oriented worldwide....

This alone would provide more much needed working capital and better distribute deserved wealth....

And most importantly will replace the lost valuations mostly due to real estate leverage and mark downs....

A revamped more efficient stock exchange is exactly what the world needs....

To call this a wall street tax is a bold faced lie. This taxes everybody.

Viraf Reporter <xxx@xxx.com>  Sat, Dec 26, 2009 at 1:28 PM
To: electronicinvestor@yahoo.com

As an active retail investor, an institutional trading consultant and an avid Barron's reader for more than 25 years, I could not pass up in commenting on the misplaced issues surrounding the proposed fee(s) under H.R. 4191 mentioned in the article below - as it pertains to retail investors.
 
If Barron's is serving the retail constituent with factful summary of the issues at heart, it would find that the impacts have negligible issues on the retail investor and are solely affecting the brokerage providers and their high frequency, low latency clients seeking order flow rebates - their real bread and butter revenue source. I know of no retail investor that has either the technology resources or the transactional cost parameters that fit that category. The retail investor is subjected to "trade" costs in the rough range of $7 to over $100, depending on their desire for low or high touch support from their broker. The added pennies under such a bill do nothing to impact that cost - nothing!
 
Since these retail firms have decided to voice their lobby organizations' clients rather than their retail customers, I suggest we draw the curtains open and ask them exactly who is being impacted and by what margins - just as I have explained above. I have seen these pronouncements stream out of every associated group, from accountants to online retail brokers, all in the name of defending the retail investing public. I find this misplaced and disingenuous at best. But I don't believe that the public understands the detail in these issues and is simply being fed what are purported to be facts.
 
When you simply re-state these points as coverage in your publication, the messaging reaches an extended and ignorant audience - by design.
 
The afore-mentioned bill has come about as a result of technology outrunning our regulatory framework and market structure - the resulting conditions robbing retail investors of much more than this proposed cost. When we get the story straight, the unknowledgeable retail investor will see the true reasoning behind this misrepresentative rhetoric. While these lobby groups are free to voice their cost and revenue implications from such a bill passage, the messaging placement in the name of the retail investor is simply - laughable.
 
I am willing to bear this cost given the consequences of ignoring it. In this case, I suggest Barron's prioritize its readers over its advertisers if it is to maintain its historical integrity as a provider of such intelligence. I have no portfolio positioning related to my views currently. Thank you.
/wr

--
Viraf "Willy" Reporter
Managing Director, LCapMA, Inc.
LinkedIn profile: http://www.linkedin.com/in/virafreporter
--

26 Dec 2009 00:06 EST Barron's(12/28)
The Electronic Investor: E*Trade Powers Up
   (From BARRON'S)
   By Theresa W. Carey
 
E*Trade last week unveiled the most extensive overhaul of its downloadable trading platform, Power E*Trade Pro, since its launch in 2000.
Chris Larsen, the firm's senior vice president of the U.S. retail brokerage, says the older version will be phased out around the middle of January. Until then, E*Trade (www.etrade.com) customers have the option of using either system.
 
Among the changes: Instead of the column of icons down the left side of the screen, the various major functions are displayed in a horizontal line across the top. You can alter the size of the icons, switch the order in which they appear, and delete the ones you don't use.
 
Larsen says that the developers were very mindful of the use of real estate on customers' screens, and added tools for those with multiple monitors. Like many other downloadable platforms, Power E*Trade Pro is made up of a montage of windows that you can arrange to your liking on your screen. With the update, you can "tear off" any window -- for example, the charting application -- and move it to a second monitor. Many frequent traders these days use multiple monitors to track quotes and technical charts, or to view stock data on one screen and options data on another. This capability is simpler in the new version.
 
Once you you start up Power E*Trade Pro, you will see the default display on the top right. Then you can add or delete indexes and set the scroll rate so that it changes at a pace that's comfortable for you. A new feature called the Ticker shows your trades in the symbols you want to see, either from a watch list or your current portfolio (or both). The Ticker can be set up to display real-time quotes or streaming news headlines; when you click on a headline, a box opens containing the complete story.
 
The Options functionality has also been updated so that the new options symbols, which will be introduced in February 2010, are fully supported.
 
"We're doing a lot to get our customers prepared for the new options symbology," Larsen says.
 
Starting Jan. 1, the platform will include a video player showing CNBC Plus over a live feed. This feature will be free to all customers, and will include archived videos. Larsen says the firm plans to grow the video player within the platform, and that E*Trade will add educational programs to the playlist over the next year.
 
"As traders are taking a break throughout the day they can watch a video. We plan to add a lot of educational videos with this new player," he says.
 
Larsen explains that the platform also attempts to embrace the outside world. In the past, he notes, "The question was, 'How do we get them to come to E*Trade and stay on our site and not leave?' The world is changing, so we're adding the outside world to our platform." If you find an RSS news feed that you want to follow, you can drag and drop it onto the news page in Power E*Trade Pro.
 
I found the changes make the platform much easier to navigate and customize. The new version is even a smaller download -- 14.5MB instead of the 19MB of the older version. Also, Mac users will be pleased to hear that the new version runs on their systems; many downloadable trading applications do not.
 
The E*Trade update is just one of many innovations we expect to see at online brokers' Websites and in software downloads in the next couple of months, as Barron's gears up for its March 2010 ranking of online offerings for retail traders and investors.
 
Your comments help us adjust our ratings system from year to year and are extremely helpful. Has your trading behavior changed in 2009? What tools would you like to see your broker offer? What do you like and dislike about your current online broker? What key functionality or service could a different broker offer to entice you to open another account -- or switch brokers completely?
 
If you've been using an online brokerage account over the last year, please drop us a line at electronicinvestor@yahoo.com with your comments.
 
TradeKing's (www.tradeking.com) Chairman and CEO Don Montanaro last week issued a strong statement against a new Congressional bill, H.R. 4191, which goes by the title "Let Wall Street Pay for the Restoration of Main Street Act of 2009" (http://www.govtrack.us/congress/bill.xpd?bill=h111-4191).
 
Under the proposed bill, a new fee would add 3 1/2 cents per share to the cost of placing a trade, and Montanaro thinks it's unlikely that the brokers will just eat the cost and lower their own profits. The bill amends the Internal Revenue Code of 1986 to impose a tax on stock, futures, options and credit-default-swap transactions, and is intended to fund job creation and deficit reduction following the recent financial crisis.
 
"It is understandable that American taxpayers and their representatives are angry and distrustful of our financial institutions, given the economic struggles of the past year, high unemployment rates, and the taxpayers footing the bill for the bailout," says Montanaro. "But we believe this proposed transaction tax will end up doing more harm than good to more of our citizens than is purported by the bill's supporters."
 
Options fees have nowhere to go but up. U.S. options trades take place on seven major exchanges. Three of them -- The Chicago Board Options Exchange (CBOE.org, CBOE.com), International Securities Exchange (www.ise.com) and Boston Options Exchange (www.bostonoptions.com) -- have recently filed for fee increases that will kick in during 2010. These fee structures are quite complex, but will result in higher fees paid by brokerages to conduct trades.
 
Firms that have had relatively low fees for options trading will most likely have to raise their rates just to maintain some kind of profit margin. I imagine the firms that have charged higher commissions will just go ahead and absorb the increased exchange fees.
 
Wade Cooperman, CEO of tradeMonster (www.trademonster.com), says, "We are increasingly concerned the rising exchange fees will lead to retail investors seeing their cost of trading increase."
---
e-mail: electronicinvestor@yahoo.com

Wrong, wrong wrong. I cannot understand how it could be considered smart to set up a "fund" (from whatever tax), to bail out bad business operators (the argument that tax payers should not bear the burden is founded on a corruption of the basic business model: that a company needs operate to make profits, not lose capital, or it goes out of business). This tax would only encourage financial risk takers to act irresponsibly (with respect to shareholders), knowing there was an external safety net. We should be striving for true accountability, not devising ways to avoid it and then spread the pain that results.

Small Trader Extinction
The audacity of politicians crafting a tax that they think we will embrace!
Foremost in my mind is how it is being marketed. Its author, Congressman Peter DeFazio, has actually titled it “Let Wall Street Pay for the Restoration of Main Street Act.” I respect DeFazio’s independence and criticism of Wall Street; however, the fact is the money has already been stolen. No doubt, he’s a popular Congressman in his home state but I feel his bill will not accomplish what he claims it will.

TARP, on its first vote, failed due to overwhelming public opposition. Fear mongering by both our politicians and banks quickly turned sentiment around for a yes vote. The rest of the money grab is history. Apparently, this will end high frequency trading by the large players. I can’t wait to see who will be excluded from this tax. Which of the banks services to Wall Street will be deemed necessary?

I asked my Senator’s aid why they opposed TARP initially only to vote yes the second time. His response was that the majority of calls came from the public during round one and the second round was mainly Wall Street types. If that is our attention span as “the public”, the transaction tax is certain to pass.

Main Street is hurting badly. Are we to believe banks actually having anything to lose?
I think banks have been very up front with their contempt towards us. Are we to believe that we will actually teach them a lesson, we the people and big brother working in unison? Between government and banks, which is the dog and which the tail?
Something’s not adding up for me with this tax. We have the likes of George Sores, Warren Buffet, Paul Volker, Larry Summers, John Bogle, Paul Krugman, and Jim Cramer supporting it. Former hedge fund manager, Jim Cramer, now, that’s the most interesting. Hedge funds would last about a minute and a half with this tax. Let alone the fact he was a stock broker with Goldman Sachs in the early 1980’s, does this former alumnus of the outfit responsible for carrying out “Gods work” have the cojones to support a bill apparently designed to gouge Wall Street? Where exactly does Goldman Sachs stand I wonder? They’ve not made any statement regarding this bill that I can find.
Timothy Geithner is one of the few top dogs that have publicly opposed this bill. This alone makes me nervous. Besides, I have to wonder how much time he has left in this administration.

The financial transaction tax had its roots in the 1970’s. It was proposed by an economist named James Tobin. The proposal was aimed at limiting foreign exchange transactions in the volatile currency markets of that period but NOT as a revenue raiser. The idea was subsequently abandoned. One of the first modern versions of this bill that I can recall was put forward by Congressman John Larson. It was a 0.25% tax on over the counter derivatives. Why not a transaction tax on ONLY over-the- counter derivatives? Wouldn’t a derivative tax garner the support the “Sage of Omaha?” We’re all too familiar with his musings on derivatives. As we know, he supports DeFazio’s bill. We haven’t heard him publicly support Larson’s bill. Why are governments bonds always excluded from any such tax schemes, perhaps the Sage trades a lot of those? Interestingly, Larson’s bill has no co-sponsors at this time.

Speaking of bonds why not impose this tax on government bond transactions ONLY, we’ll call it EDAT “Enough Debt Already Tax.” We need not give our politicians any more money. Something must stop their mad frenzy to issue debt. Our responsibility should be to keep money from them at all costs or at least until they show us where their loyalty lies.

I need not go into the simple arithmetic of this tax concerning small traders and investors at large. If you haven’t figured out how much they plan on gouging you by now, then sit down and do some simple math. The ignorance of certain media articles astounds me. One example is that it wouldn’t hurt the average investor because a $500 transaction is a mere $1.25. Sure, buy those three quarters of one share of Google and stick that in your retirement account forever. The bill actually reads “negligible impact on the average investor.” Perhaps that could be true if you only invest in penny stocks. From my interpretation of the bill, tax differed accounts will be excluded. The language in the bill states that this tax will be reimbursed for transactions in these accounts. My issue is, even though they claim an exemption from our retirement accounts and state they will subsequently reimburse any tax accrued, it seems government now has wormed its way into our 401ks. Why collect this tax in our retirement account transactions in the first place?

Apart from obvious issues of this bill, the greatest support for this lies overseas. Gordon Brown is front and center. I’m speculating he’s going for a populist agenda to boost his dwindling support… This Brown character, wasn’t he responsible for unloading much of his country’s gold at the dead lows some years back? Now there’s a guy we want financial ideas from.

The IMF is even interested in this tax. Why, even the last G20 had time to discuss this issue.

It seems discussion of one world government is no longer reserved for conspiracy nuts.
It is openly discussed by world leaders as though it was our destiny. Domestic taxes are one thing but when they become international in nature, not unlike cap and trade, I become leery. Britain and France even recently suggested this tax be used in the global warming effort! Some of our politicians haven’t an issue with this tax, providing it’s coordinated worldwide.

This tax will die globally only if it’s put to rest in this country right now, before it goes any further. June 2010 is the next G20 in Toronto. From what I’ve read, it will be a topic of discussion, providing it doesn’t become law before that. Incidentally, there’s an online petition against this bill, with just fewer than 13,000 signatures. Surely there must be more then 13,000 investors and traders not to mention many thousands of people that work at small brokerages, technology firms that develop trading software, hardware developers, and trader’s education firms?

The above commenter is 1000% incorrect....

There is a place for banking....

And there is a place for securities....

They have separate places....

Stocks are one of the very few means to properly distribute
wealth and innovation....and EFFICIENCY is key...

What needs to happen is to make stocks more fair and accessible to RETAIL participants....THE MORE THE BETTER...

Advantages should not be granted to the NONRETAIL sector....

All exchanges should be defragmented....and information should be fact based via wiki....Participants should pay no more than 20 cents per thousand units....as demonstrated today by BATS....

A person who devotes their lives to a company....deserves efficient ownership....The buy/sell gap needs to be closed to the most efficient degree possible....

It was not long ago that a transaction of 1000 shares costs several hundred dollars....today 20 cents...

It was not long ago that many bid/ask spreads were more than 5 to 10% on many stocks....Today it is less than .5%....

The market operates better with millions of RETAIL participants.....not a few large managers with similar opinions.... exiting at once....

And importantly.....securties allow for the trial failure process of progress....To negate this funding by inefficiencies would slow innovation and progress....

ie Transaction inefficiency could slow progress on medical, invention....etc....by more than 80%....THIS IS THE MARK OF POPULIST STUPIDITY....

www.fairtax.org
Buying stock is a purchase. Tax it with a sales tax, just like everything else. Get rid of the IRS, the income taxes, and all of the loopholes and advantages of the income tax code which even the IRS doesn't understand.
The FAILURE mode is that people would stop buying things and grow and build their own stuff and trade locally, thus reducing the demand for resources and CO2.

The success mode is when everything we buy shows how much it really costs to get it (including the cost of wars and health care).

A dead planet is a lot more regressive than a sales tax.

After observing the fate of the Healthcare legislation,I am pessimistic about the fate of any attempt to tax or regulate the big financial houses.Our Legislative branch has amply demonstrated that it is a servant of these creatures.Any attempt to discipline them would be turned against the public-we would probably end up saddled with the responsibility of paying a new tax and GS would have the Authority to collect and transmit it-minus a fat commission-to the Government.

Tobin himself abandoned the idea so why is the EU even debating this tax?
Published: December 15 2009 02:00 | Last updated: December 15 2009 02:00

From Mr David Beddington.

Sir, Gordon Brown is wrong when he says European Union leaders are “trying to make a global supervisory system that makes sense for all the financial centres in the world” (“European leaders push case for Tobin tax”, December 12).

A financial transaction tax does not attempt to address the cause of the recent crisis and would be a destabilising action. Not all financial market participants would contribute equally. Different types of investors trade at different frequencies and would therefore be affected differently by the tax. Equity market-makers trade more often than traders of collateralised debt obligations or mortgage derivatives. The latter contributed more to this crisis, yet his proposal would tax the former more.

The liquidity impact from this tax is extremely hard to judge. Liquidity does not respond in a linear fashion and is one of the most difficult aspects of markets to model, although a tax would obviously be very negative. While the illiquid and low trading frequency credit markets (at the heart of the recent trouble) froze last year, the more liquid equity markets had fewer issues clearing and the highly liquid, rapidly trading Group of Seven government bond and forex markets cleared consistently. So the tax would hit the source of the problem the least and directly diminish the liquidity, therefore increasing the risk, in the markets that did continue to function because these markets have a higher average trading turnover.

The economist James Tobin floated the proposal to deliberately make finance less efficient. But it seems bizarre that to repair a damaged industry the politicians want to make it less efficient. Even Tobin himself abandoned the idea.

The problem with finance is with an implicit or explicit guarantee of banks by governments and taxpayer-subsidised lending through central bank facilities. The long-term solution to this might be to have banks hold more capital so they are more stable and pay an appropriate fee directly connected with the size of the obligations that governments are insuring. This has nothing to do with transaction taxes, or banker bonuses for that matter. As for using the tax to pay for environmental damage why not try taxing polluters instead? That might actually raise money and provide incentives to reduce emissions. The transaction tax does not “make sense”, so why is the EU debating this side show?

David Beddington,
London EC3,

Let's just make it simple here....

Here is what the Transaction Tax WILL DO...

The Big Banks will become the market makers once again....
thereby controlling the spreads in stocks....

The Big Banks will be exempt from any transaction tax....
Without market making....THERE IS NO MARKET....

The difference which will widen dramatically.....just becomes another multi-billion guaranteed revenue stream
for the Big Banks...

Only the RETAIL segment would pay this tax....

The politicians that have proposed this tax have told the public that it would be a way to directly tax the banks....

The Big Banks will never pay a dime with this type of tax....

..............................

A direct tax on Big Bank profitability is the only way to provide for an effective tax that the BIG Banks would actually pay....

Furthermore....Big Banks should be separated from the securities business via Glass Steagall...

As far as correcting HFT or other harmful algos....
the solution is very simple....All orders must be made good for 1 sec minimum....

The whole issue regarding marketstructure is very simple....

Defragment the exchanges....

Make margin simple....4:1....intraday and overnight....

No account minimum

No short sale rules....just set a limit by electronic tag to the amount outstanding....

Make a one second minimum for all entries....This eliminates HFT and other unfair algos....

Since ECNs have enabled RETAIL to take away the spread by market makers and specialists....they reinvented themselves by HFT algos and other sub-secong techniques....

Eliminate all dark pools and other forms of off exchange order matching....All must be out in the open....first come first served....All securities....

There should be no taxes of anykind on any securities worldwide....this evens the playing field...

Allow for the BATS model efficiency to take hold....
There is no reason that a person should be paying over 20 cents for a 400 share entry....

Then let the best ideas win....

And also separate banking from the securities business....

One serves innovation.....One serves the money that was made because of innovation....

Sorry ....but govt. is already taking more than their fair share of the apples from the orchard....while wanting even more apples....and demanding that more apple trees be cut down....

If anything...banking has to be separated from the securities business....

There should be no taxes of any kind on any securities....

Securities is the best means of distributing wealth and innovation if properly structured.....and banks are the best means of loaning money if properly structured....

Banks must have skin in the game and be conservative....They are the main stay/back bone of the economy....

The securities side is different....and cannot be mingled in any way with banking....

.........................

The securities market needs to be even lower cost and more and more retail oriented....If a smart Chinese, AMerican, Indian, Brazilian, Japanese, Korean etc wnats to transact...they should be able to turn on their computer....and quickly peruse factual wiki based information in the language and currency of their choice....buy 100 shares or less and pay no more than 20 cents....

This is what ECN based direct access technology does....and can be applied as an actual exchange as well as has been proven by BATS....

It was the ECN that enabled the individual with a PC to trade more efficiently versus the market maker system by anyone in retail being able to post between the bid ask with their own pc....

What Brown/Pelosi/DeFazio/Harkin is wanting to do is to reinstate the marketmaking function as it was before....thus granting the big banks the power once again to create the spreads on securities as they see fit....

If the opaque derivatives market allowed for such that they were traded on an ECN based exchange....the big bankers revenue stream would drop dramatically by billions and billions....This is why at this very moment that they have paid over $300 million to lobby against exchange based derivatives....

The exchnages need to be defragmented.....and to be made fully all out in the open....first come first served exchanges.....

There needs to be millions and millions of RETAIL accounts that can trade very efficiently....because this makes for the best type of securities marketplace....

Having just a few large funds does not make for a good marketplace....to have a handful of managers exiting at once does not make for a good marketplace....

And there would be no meaningful returns in equities if all indiduals indexed....recently proven by the fact there has been no positive return for 10 years in the US and much longer in Japan....

Very seriously here....Why should an individual pay for advertising....by paying $9.95 for 400 shares when it is already possible today to pay 20 cents ?

If a willing person in India wants to try and get ahead and buy 10 shares of a security efficiently....they could do so if the BATS ECN Exchange model is adopted.....which has quickly taken market share in the US and Europe....

I can go on and on.....and unlike Brown who has an TV news background, Pelosi who has a pure political background, DeFazio which has a tree farming background, and Harkin whose latest claim to fame was corn based ethanol....I have been in securities for over 30 years.....

Brown/Pelosi/DeFazio/Harkin are through the Transaction tax is granting the big banks the market maker exemption....there is no market without someone making the market....otherwise it will be extremely disorderly with spreads that would range from 5% to 20%....and many weaker securities may not even have a bid ask.....Thus the TT tax is simply an incredible gift to the big banks from these politicians ....which have no securities background whatsoever....

Some good information is coming out in the comments here.  It's not the normal forum trolls at all in here.  The real issue at hand here is that economics is below politics in importance in the grand scheme of things.  Economics is just household management after all.  Financial activities are just a frothy whipped topping on economics, so they are even more inferior to politics.

The appropriate goal of the transaction tax is to claw back the standard of living for the regular people of the country.  Shore up medicare and social security and that sort of thing.  Ultimately, a high standard living and increasing lifespans will not be able to be achieved unless there is actual production of new wealth.  A stop gap can be a claw back of stolen wealth from the BIG banks, leading to their nationalization and triage.  From the point of view of all of society, this tax would still be just redistributing the pre-existing wealth.  We have to address the damage done since Rockefeller announced in 1969 that America would be de-industrialzed.  Breaking the back of the big banks and ensuring the social safety net survives will be of great importance in moving forward in a democratic country.  It is apparant that this will not be the case with the exact law in question.  The widening spreads and increased oligopolistic control of the markets will probably occur as many have posted in here if there is not a political reform before any sort of anti-speculative punitive tax is introduced.  The primary goal of anti-Fed forces and other sorts of patriots has to be to re-capture the captured poltical system in the country.  Almost anything that comes out of this poltical environment is going to be poison, and do more harm than good in the long run.  Our best hope in the long run is for gridlock in the short run.

We have to work to break down the false left-right paradigm in politics that perpetuates the illusion of the possibility of change.  The greatest enemy of any movement against the oligarcy is cultural populism.  This allows kept politicians to engage in demogogy based on the natural characteristics of the people (race, religion, skin color, man, woman), and obsucure the crimes being committed against the people.  What is needed is economic populism.  The idea that we the people have economic rights that the powerful and wealthy are bound to respect.  That doesn't exist in the USA right now, except for something like the infowars.com faction and a few others.  Even then Austrian fetishes are difficult to deal with because their political speech is seductive while their anarchistic policies play into the hands of rent seekers and monopolists.  What passes for an opposition is held in the thrall of market fetishism and cultural populism.  Groups like the tea party people are already neutralized because their poltical energy has been diffused by cultural populist demogogy by globalized establishment Elephant Party types.

I think that after there has been progress in the poltical fight there can be progress in supressing speculation and corrupt banking practices.  Some sort of securities transfer tax, properly targeted at the big gangsters would be a useful tool in supressing their activities and driving them out of the country.

Let the swiss herd up every Soros in the world, and all their WHOPPER computers can trade empty boxes with each other until the end of time with a few sleepy Swiss gnomes for referees.

The most recent incarnation of this nonsense is H.R.4191 introduced 12/3 by DeFazio.  He provides a little more detail in H.R.4191, but it is still a crock of manure.  The tax is per transaction, not per side, so you will effectively pay it once per round turn.  The rate for stocks remains at 0.25 pct, but is reduced to 0.02 pct of notional value for futures and swaps.  The rate on options is same as for the underlyings, but applies to the premium paid and not the notional value.

The title of this bill is "Let Wall Street Pay for the Restoration of Main Street Act of 2009."

A more appropriate title might be "Let Main Street Pay for the Sins of Wall Street Act of 2009" because Wall Street will only be paying these taxes in DeFazio's dreams.

Here is what is actually happening.....

Pelosi is gifting the BIG BANKS a new windfall revenue stream by granting them sole market maker exempt status....

THIS IS WHAT IS HAPPENING....

The BIG BANKS WILL OWN THE WIDENING SPREAD ......

WITH NO ONE ABLE TO CLOSE IT.....

WHO PAYS IT ?????

RETAIL ONLY......PELOSI/DEFAZIO/HARKIN SAY THE OPPOSITE TO THE PUBLIC.....THEY ARE MAKING THE BIG BANKS PAY ?????
WHEN THEY ARE ACTUALLY GIFTING THE BIG BANKS A NEW MULTIBILLION $ GUARANTEED REVENUE STREAM....SOLEY PAID BY THOSE WHO ARE NOT MARKET MAKERS....

PELOSI/DEFAZIO/HARKIN ARE EITHER:

INCREDIBLY STUPID....

OR

WORK FOR THE BIG BANKS....THEY ARE LIARS....

MY GUESS IS SOME OF BOTH.....

The banks would love the TT tax....

It would guarantee wider and "govt" protected spreads for the BIG Banks....

A govt. guaranteed BIG Banks profit machine.....

Which RETAIL only.....pays for.....

This is so bad....it is sadly funny.....

It would be like building an ice house in the desert.....

And so just what is the purpose of a TT tax ?

To make BIG banks pay for their economic ills ?

In what way does a TT tax do this ?

A TT tax rewards BIG Banks ......

So when the politicians claim the opposite.....

Just what is the populist population going to be thinking ?

They are going to be thinking that THEIR politicians are taxing the BIG banks....

When the truth is ...they are paying them even more.....

Anyone get the INSANITY yet ??????

Quote from ZeroSigma:

Forgive me, but that's a very romantic and slightly... out-of-date view of the market making activities. In other words, you want your average girl to be 'good' and literally lie back and think of England as you do onto her as you please? No longer true, and has been false for years.

The idea that you could force these firms to quote a fixed-width, reasonably-sized, usefully narrow, symmetrical, continuous, unconditional and two-sided prices is unrealistic in at least six out of seven respects. I mean, if you are a regulator (sounds like;), i could provide you with some solid evidence of how exactly these firms work as I've been watching them in awe for years. Let me just say here, that their overarching goal is to withdraw liquidity when the customer is most likely to need it. There are very ingenious and quite effective in second-guessing your next move. One has to develop some tools to see their actions, but it is all there for you to see, glaringly obvious and quite depressing if you think of the enormous mental effort that has been expended on devising those active market making strategies... all that lateral thinking, all that lightspeed technology, just to screw you up. How much efficient would American autos be if those fat bonueses were instead forked out in Detroit...? So you might think, but before you act on your intuition to regulate, before you reach for you carving knife, bear with me a second longer.

As someone already pointed out here, apart from the reaction speed, you no longer can tell the difference between a modern, i.e. an active market maker and your median Joe-useless-program-trader (no Joannas in this field as far as I know;) In fact some of these firms use separate shill quotes, pretending to be the customer! And all that to widen the spread just when you were about to trade. In fact, the competition among them does not help much, because they use the same conditioning info (i.e. your actions and the market action) and react to it in exactly the same way... yes, its a herding behavior.

Regulators would probably want to turn back the clock, and force selected market makers to become passive again, extracting their socially useful function from the useless speculation, right? That was already tried before. Selected industry leaders, i.e. large, 'efficient' companies were nationalized (while others, smaller, were liquidated) and allotted monthly production targets, of tasty, healthy, durable, socially useful goods. Even grocery stores had empty shelves for decades and the authorities needed a five-meter-high wall just to stop people from fleeing. Because central planning is what you are effectively advocating. Extracting the socially useful function from the useless ones, which the government disapproves of, is a very old socialist idea. Today it looks more outdates than the Tobin's original tax rate in today's 0.00001-spread Forex. The IMF's director, Strauss-Kahn, is exactly right that modern socialists are anything but - they are all living in a time-warp, with their attemps to micro-manage the economy's every market...

I tell you that experience teaches it didn't work in diffuse, competitive, multi-agent markets. Collectivization failed miserably when applied to markets such as food production. Some socialist countries didn't even bother to extend their reign over the farmers. But those stubborn enough to force their preconceived ideas of social good, and like the Soviets marched forward with central planning of the farming industry, managed to create a famine of biblical proportions...

And your idea of a 'carve up' of the socially useful plain-vanilla market making for the benefit of the society has even more unintended consequences. First it would widen the bid/ask spreads to the max, because this is exactly what oligopoly markup pricing is all about. If you make a short visit to monopoly SPX options and monopoly ONEChigago SSFs, you might be able to taste the future you envisage... spread so wide you could park a bus between the bid and ask.

Then restricting competition among market makers by forcing them to adopt passive 'useful' strategies would only accentuate the already dangerous (according to Wilmott) herding behavior among the high-frequency traders. I mean, if there is only one (approved) market-making strategy in town, whilst others are taxed out of existence, you get from here to the portfolio-insurance-style crash in no time at all.

And last but not least: who would play the village idiot, i.e. the greater fool, the shooshine boy who puts money on the market maker's table? Commercials trading VWAP once a month? I ask you: who would bring the money to the table, by panic-shorting those painful bottoms, by chasing those parabolic 'trends' and believing in the magic presence of antigravity in price spikes?

I mean, the noise trader, the despised common speculator is important for this very reason that he (and I;) will sometimes (well, usually) 'foolishly' go the 'wrong' way. Which makes him sometimes the only one to patch a liquidity hole universally created by your herding market makers. Rational models will not save markets from 'consensus' divergences - it takes the uninformed hopeful 'idiots' who will bravely step in an obvious downtrend (or usually - much earlier). Your officially approved market makers would just widen and skew their spreads and collect the winnings untaxed. What a Carve Up! ;)
--------------------------------------------------------------------------------

...................................................................................

ECNs were created in order to create a more fair and efficient marketplace....It took many years for this to occur, and thus the creation of ECNs has closed the bid ask spread....saving 100's of Billions in spread differences....and ECNs police what used to be rampant market maker collusion.....

Did NASDAQ market makers successfully collude to increase spreads? A reexamination of evidence from stocks that moved from NASDAQ to the New York or American Stock Exchanges

http://ideas.repec.org/p/fmg/fmgsps/sp170.html

What would be rather incredible is to wipe out hard earned market efficiencies brought forth by the personal computer and ECNS....

A more modern day view or introspect by proposed increases in governance and their revenue to do so would be to establish a more fair and more efficient marketplace by adding another ECN called GOVT....This ECN would create evergreen revenues to the govt. and promote efficiency by attaching to the setting a more fair and orderly marketplace....particularly for retail....as well as much lower cost for retail .....

Why pay the advertising costs of a firm with the average 400 share order ?

Why would one want to pay $9.99 per order....when one could pay 20 cents....?

Why not eliminate all dark pools and force all out in the open rather than giving priviledges to the few....?

Why create a marketplace that favors high concentrations of holdings that are difficult to buy/sell ?

A much better marketplace would be one that levels the playing field for ....while making the markets more efficient....defragmented....available to all retail worldwide in the currency and language of choice....and should never be taxed in any form in the name of efficient capital....

Why ?

Which marketplace would be better for all ?

A marketplace that has 10 managers that oversees $10 Billion that have similar views.....require additional expense....are trained similarly....and thus have to move towards the exit door at once ?

Or

A $10 Billion marketplace that is comprised of 10 million individuals with more dispersion of opinion....operating with lower costs ?

............................................................

If anything the govt...could assist in being part of a fairer more efficient marketplace worldwide.....

This means making the US market user friendly to the BRIC countries and vice versa....

............................................................

Thus if the marketplace were to become even more efficient ....thus inviting many millions of people to participate....the end result being more innovation because of more opportunities.....

How much clearer can this get ?

Look ...here it is....

Any time in the past with any country that has tried such tax....the market makers were always exempt....

Any countries currently allowing it....exempts the market makers from all such taxes....

Retail pays this tax....

.........................................

This means that the very banks that have been bailed out....would be exempt from the tax....

There cannot be a market without somebody making a market for the securities....

ie a market maker will buy and sell a single stock thousands of times a year....which means that a tax many times the price of the stock would have to be paid....

Believe it or not....politicians such as Brown, Pelosi, DeFazio, and Harkin are actually that naive....They really do not think that the market making function is necessary in a marketplace....

It just so happens that a portion of the retail public got fed up with market makers stepping between them and the bid ask spread....so a group of frustrated retail traders created the ecn....and after several years of fighting legal battles.....won against the big banks....to the degree that banks bought the ecns....

Next up will be the exchanges in terms of efficiencies.....for which BATS has made it possible for retail accounts to trade for 20 cents per thousand shares....

As a result there are thousands of retail accounts that have replaced a lot of the market makers.....

The transaction tax would eliminate all of the retail traders and give this market back to Goldman Sachs, Morgan Stanley and other banks....which is highly flawed because the retail traders had nothing to do with the current financial debacle involving the shadow mortgage securitized market....and the big banks that caused the problems will get rewarded by becoming the sole market makers again.... They always get exempted from the transaction taxes....or else there would be wide spreads in most stocks.....a 10% spread would be common....and some smaller cap stocks may not have a bid or ask....

What really needs to happen is to make the retail market even more efficient and information fact based such that the playing field is made level for the retail trader....

The market would work a lot better if there were millions of retail accounts with differing opinions rather than controlled by relatively small groups of money managers controlling extremely large sums....in that they would want to move out at the exit door at once....It is better to have stocks more widely dispersed....

Retail really needs to be more efficiently retail....such that any retail account ....in the language and currency of their choice....participate in stocks throughout the world....

Furthermore there should be worldwide agreement to never impose any taxes on this capital in order to make the playing field more level for retail....because the big internationals will just move their money to the lowest tax region...a choice retail does not have....

Also it is different today than yesteryear because direct access technology and the personal computer was not available....nor was the internet....

The point being that ecns has made trading more efficient for retail...and companies like BATS are making exchanges more efficient....

I have been a retail trader for over 30 years...and will be adding more informational posts....

But I am also angry at the banks....as anyone should be....
The banks should be taxed directly on their profits in order to pay for THEIR bailouts....THEY are responsible and should pay.....but a transaction tax is not the right vehicle for it.....With a transaction tax....the banks will not pay a dime.....

 The "A transaction tax would kill liquididty" mantra has been repeated ad fucking nauseam on this board. Yet, not one fact or logical argument has been put forth. It is taken as a dogma, and article of faith that shan't be questioned so pena of excommunication from the religion of capitalism.

Would it kill any opponent of the Tobin tax to flesh out the "liquidity killing" argument, preferably with solid logic? Pray tell where the almighty capital will hide if the tax is imposed. Is they gonna stop trading? Will they all rush unto solid assets like farmland in Africa and platinum bars to be delivered in a vault? Will the NYSE close its doors? Will Euronet collapse?

Give me a goddamned break!

Read http://www.jubileeprosperity.com/ and

contact Pelosi and Reid

or say goodbye to America...

Tyler - are you saying you think HFT profits are in the ballpark of $100B/year? BTW, electronic customer exuection platforms at banks such as REDI at Goldman are clearly not HFT.

Do you even realize how asinine this tax is? For a trader to trade Eurodollar futures at the 0.25% tax he would take a $5,000 hit on a 1 lot round turn. Given that the bid ask spread is $25 nobody would trade this product and therefore banks could not even hedge their interest rate risk. Truly one of the most inept ideas ever floated.

I think what we need to see is a market wide uptick rule. We need to make sure the stock market goes up because as an investor, it is my right to earn a return. I propose that any transaction should only be allowed to be executed at a higher price. For example, if I buy, I need to buy at a higher price. If I sell I need to sell at a higher price. Also, if there is alot of selling interest, sell orders should be broken up into smaller pieces that each have to be sold at an ever increasing selling price.

Transaction taxes are excise taxes. Excise taxes are one of the few moral forms of taxation as they can be legally avoided. Also they are very constitution-friendly as they are indirect taxes.

All direct taxes must be abolished, just like the (original) constitution said.

This particular transaction tax seems just as good as any other. As a supporter of moral taxes in general, and the constitution as well, I'd say, let's do this.

Here it is....

The tax secures one certainty....

Its implementation will guarantee.....I repeat guarantee the removal of the financial industry to a non US location....which may never return....

After all...the US is a very giving country....

It has given away its manufacturing base....

Why not give away its financial base as well....

Let's see.....what's the next segemnt the US will be giving away ????

As I said....the US is a VERY GIVING COUNTRY....

Makes one wonder ....WHY ????

Those who are so enamored of this tax need to stop and reflect for a moment.

One need not be a daytrader to be impacted by it.  Anyone with a $100K account full of ETFs who merely makes monthly adjustments to stay on portfolio beta or whatever else he's doing will get nailed.  The 0.25% doesn't sound like much, but it will add up in a hurry and as a consequence we will all make fewer trades.  The HFT folks will probably be out of business, which is to say that spreads will ramp back up to the levels we had to deal with 15 years ago.  Those who are still paying TD and Scwab about ten  bucks to do a trade will likely see their actual costs double or triple.  Those who are paying IB a half penny a share will see their costs go up by orders of magnitude.

With all due respect to those who think this tax is a good idea, it only looks to me like yet another example of rudderless politicians responding to fickle, uninformed public opinion, attempting to fix something they do not understand, and which may not even be broken.  The law of unintended consequences will apply.

It just sohappens that daytraders have largely replaced marketmakers and specialists....

They are a part of the market mechanism now....and will become a growing segment....trading securities from all over the world...

The technology is here today ie BATS to better distribute wealth to all participants in all countries...

There should be no taxes of any kind on any securities of any type....in the name of efficient capital....

Banking should be separated from securities all together as they serve a different function....

What the market really needs is for anyone that has a computer and savings to be able to participate in the markets of their choice....for very little or no commission...and no taxes of any kind....a strong marketplace works much better with millions of small accounts with differing opinions....than just a handful of mutual funds that manage similarly and will be seeking the buy/sell doors at the same time.....

Then and only then can employment surge via capital....or else the govt. can look more and more like the Chavez, Morales, Castro states where the non qualified rule....
Let the government take care of YOU....
.................................................

Since the US is so evenly divided...and since more than 47% do not pay any income taxes....perhaps a good idea would be to have the Democrats to the left of the Mississipi on the "Hollywood" side....and on the right the Republicans can live....

Each side ought to be happy....

10 years later upon inspection....the area west of the Mississippi will be identical to the current day Haiti....and the right will be more like a new Switzerland on steroids...

Why not ?????

I hadn't planned on being anonymous....... can't tell when I'm logged in or not.

HFT must be squished; the tax seems a good way to do it. I'm sorry to part with the Day-Traders, but some of you guys need to get a life outside. It's an addiction.
I know you are all plenty smart enough. Why not put all your money and financial/management skills into specific small listed companies, and use your talents in the real world. The US economy is not going to be saved by the stock market, it is going to be saved by individual enterprise, design innovation and hi-tech manufacturing. It ain't going to be saved by carbon-trading or financial gymnastics.

Sorry,

maybe build a log cabin out in the woods, like someone else has just done for therapy; breathe some fresh air and get your hands dirty.

Look to Detroit for an idea of what NY will look like after a tax like this is put in place.

Hello Zurich.....

When you kill the goose that lays golden eggs you eat well for one night, but you lose a lifetime of golden eggs. This tax is not well thought and pushed by people with no experience in the financial markets from areas of the country with no skin in the game.

HFT must be squished; the tax seems a good way to do it. I'm sorry to part with the Day-Traders, but some of you guys need to get a life outside. It's an addiction.
I know you are all plenty smart enough. Why not put all your money and financial/management skills into specific small listed companies, and use your talents in the real world. The US economy is not going to be saved by the stock market, it is going to be saved by individual enterprise, design innovation and hi-tech manufacturing. It ain't going to be saved by carbon-trading or financial gymnastics.

Sorry,

maybe build a log cabin out in the woods, like someone else has just done for therapy; breathe some fresh air and get your hands dirty.

Secondary corporate bond trading costs are approximately 10-50 times higher than the respective common stocks because sell-side Wall Street has such a hammer-lock on trading them that the bid-ask spreads they set, and "earn," preclude short-term speculators (the supposed "excess" speculation) from participating!

And the volatility and illiquidity in corporates last fall was •so• much worse than in the equities, despite the fact that the bonds are higher on the capital structure (therefore less risky, all else equal)!

Put corporates on an electronic exchange and take away Wall Street's virtual monopoly, this would greatly reduce the need for the CDS market, which, as structured, was a racket for the big banks to amp leverage, at least as long as the counter-party risk was single-firm(AIG,etc...) and there was no regulation or proper margining.

This is sooo easy....

Believe it or not ....there is a market mechanism....

The market mechanism used to be called Specialists
and Market Makers....

The bid ask used to be 2% or so...and one would pay a few
hundred dollars for a 1000 shares....And this was after the Specialist and Market Makers made their vig....

The Specialists and Marketmakers vig was closed by the ECNs which allowed mom and pop to post their orders without having to pay a Specialist or Marketmaker....

Te spread between a bid/ask went to pennies and less solely because of this....

Now that the markets are more fair than they used to be....not perfect of course....there are those who would like to impose further inefficiencies on the current system....

This is afetr the fact that both Specialists and Market makers have been largely replaced by traders who trade stocks electronically....via ECNs...

The proposed tax would remove this market segment overnight cuasing a 30 to 70% drop in stock indices....

Why not just outlaw the PC and efficient markets....

And do remeber this....the people pushing for this and any other type of tax ...simply do not have the background or expertise in this area....

ie The closest experience DeFazio has is tree farming....

the closest experience HArkin has is corn based ethanol production....

There is no securities experience on Pelosi's biography whatsover....

To enact such a tax....particularly proposed by those that are not qualified....is the same as committing "Economic Suicide"....

Non qualified people wanting to regulate industry for which their background experience is zero....is a BIG BIG problem....

And the populism stir....only suggests further insanity....

I feel like regulating Health Care ....I think I'll read a health magazine tonight....and make some more health regulations tomorrrow....

Those wanting such a tax....are both ignorant and ill informed as to how markets actually work....

Just who we need to make sure the non qualified commit
economic suicide....

Personally....I would love to see the exchanges domiciled in Switzerland....

The costs of the securities business in the US is just too high....and this is the last straw....

Maybe I will be logging on to a Swiss based computer....SOON.....

I wonder what they will use the buildings in NYC for ?

Here is the paradox:

This tax is pushed to raise billions per year from all of the speculative transactions that occur in our "bloated" markets. Best of all it will eliminate the speculators and their speculative activity that make up most of the taxable transactions in the bloated markets.

Where is the tax revenue going to come from after you put the people who make most of the transactions out of business and exempt the majority of the left over volume?

You can't have it both ways. It defies logic.

I'm for this tax. I'm for it because right now the markets are dysfunctional. I think a big part of the reason why is that current policy encourages people to approach capital markets much like a tourist from Iowa approaches a craps table in Vegas. Tax them and trades might possibly have to make a little more sense. I realize this position is unpopular. I don't care. It seems to me most everything that would save us from ourselves is unpopular. The current system isn't working, unless you define working as fleecing the retail long to prop up the economy in the Hamptons. I have pulled my equity and it will remain pulled until the abuses are weeded out and stopped. A transaction tax is not ideal, but it's better than any other proposal I've seen come out of Sodom on the Potomac.

Tyler,

Regulations against "churning" are in place to prevent dishonest brokers that have been given control over client funds from trading for the sake of racking up commission charges. They have nothing to do with the effect that frequent trading has on the overall market. The way you are trying to use FINRAs terms about "excessive" trading in this sense is disingenuous.

If you look at the second paragraph of your own cite, this is self evident.