The Transaction Tax Is Harmful
This house believes a per-trade "transaction tax" on investors will do more harm than good.
Yea v. Nay
Marla SingerThe Case For The Proposition
Mood of the House- Yeas Prior: 54 Subsequent: 56
I thank the Chairman for the floor and beg the continued indulgence of this House as I endeavor to disabuse some of its members of a rather dubious notion. Namely that a tax on securities transactions, effectively a revival of the infamous "Tobin Tax," (in the interest of brevity, shall we hither just intone... "the tax"?) is effective, wise, or even mostly harmless. The fact is, such a levy is exactly none of these things, has never been any of these things, and is unlikely to, in the hands of the United States Congress which, in conjunction with the current President of the United States, must certainly be the most fiscally reckless administrative body since the Emperor Nero, suddenly mutate into some semblance of utility.
No less than five serious failings, any one fatal to the tax, are apparent to any member of this House willing to examine the facts carefully.
First, the tax is entirely unsuitable for the purposes it purports to serve.
Second, even assuming a perfect dove-tail with the purposes the tax claims to further, these are not goals this House should endorse.
Third, the tax is likely to do considerable harm to the economy of the United States both in the long and short term.
Fourth, the tax is wholly impractical to implement.
Fifth, simply as a philosophical matter, and in an environment characterized by the absolutely colossal failure of governments to produce even vaguely satisfactory results of any significance whatsoever, a tax that subsidizes further fiscal profligacy cannot enjoy the sanction of this House.
The tax is entirely unsuitable for the purposes it purports to serve.
H.R. 1068, the "Let Wall Street Pay for Wall Street's Bailout Act of 2009," cites, among other findings that:
The Bush Administration allocated the first $350 billion of TARP funds in a manner that has outraged the Nation by failing to provide the most basic oversight of the funds.
[...]
The $700 billion TARP fund and the new Federal Reserve lending facilities were created to protect Wall Street investors; therefore, the same Wall Street investors should pay for this infusion of taxpayer money.
[...]
All revenue generated by this transfer tax should be deposited in the general fund of the Treasury of the United States, scaled to meet the net cost of these bailouts, and phase out when the cost of the bailouts are repaid.
Even the most cursory investigation by this House will uncover the fact that funds distributed under the TARP program were either in the form of loans, equity investment or warrants of one kind or another. Once these loans are repaid, with interest, it should be quite unclear to this House exactly what remains to be repaid. And, to the extent that TARP funds were eventually used for purposes unrelated to Wall Street bailouts, this House would do well to contemplate why a levy on Wall Street should be applied to these expenditures at all.
A clever observer might also wonder how the revenues from this levy will be expected to enjoy any more prudent application than the misused TARP funds the Congressman so decries.
I invite any member of this House to pursue the language of H. R. 1068 to divine the stated motives of the tax. It will readily become apparent that a number of political constituencies have quite opportunistically latched on to the bill to further purposes both overt and covert that are simply not envisaged by the bill's authors, sponsors or co-sponsors.
Having noted that the original purposes of the tax are both limited and redundant, I now face the sad task of addressing the many collateral purposes that legislators, commentators and members of the mainstream media have, quite wantonly it seems, and if you will forgive the pun, repurposed the tax for. I should like, however, to note here that my addressing these diversions should in no way be seen as an endorsement of their legitimacy. The purposes of the bill are plainly stated and quite limited. What follows is merely the ejection of a number of legislative stowaways.
Speculators or the Elimination of "Socially Useless" Endeavors.
A number of the tax's proponents claim that the measure is designed to curb the excesses of "Speculators." Conveniently, this term is rarely defined and therefore manages to capture the imagination of the populous as they each form their own individual spectres they suppose will be vanquished by the levy.
I would ask this House to consider the value of liquidity, of well arbitraged markets, and to contemplate the impermissibly vague nature of the term "Speculators" used by proponents of the tax. Whatever definition we might pin these interlopers down to will, in any event, be far afield of the original purposes of the bill. How else are we to explain the bill's express sunset clause requiring it to "...phase out when the cost of the bailouts are repaid"? Or should we see this for a blatant lie, all the more shameful for its appearance in print and before the United States House of Representatives?
Social Justice
In this view, the tax is purposed to right the wrongs of years of Wall Street excesses and somehow even the score for the injustice of this inequality.
Even considering this grievance as read, the tax, which will surely be passed quickly and directly to investors of all stripes and sizes, is hardly the mechanism to address these supposed wrongs.
Shrinking a "Bloated" Financial Sector
This is the view of Paul Krugman, and in the interest of the respectful use of the House's valuable time, I suspect that this alone is sufficient rebuttal.
Second (and Third) Derivative Repurposing
It may also interest this House to know that the original Tobin Tax was intended to apply only to foreign exchange markets in the aftermath of the collapse of the international foreign exchange price fixing regime of the Bretton Woods Agreements. Tobin himself complained of the many pretenders to his original purposes.
"I have absolutely nothing in common with those anti-globalisation rebels. They've hijacked my name ... The tax on foreign exchange transactions was devised to cushion exchange rate fluctuations...."
Even assuming a perfect dove-tail with the purposes the tax (and many interlopers) claim to further, these are not goals this House should endorse.
A tax actually having the effect of eliminating speculators, addressing questions of social justice on Wall Street, or shrinking the financial sector is simply not a bit of legislation that should enjoy the support of this House.
The only possible result of curtailing "speculation" by increasing turnover costs is to increase costs for all investors. Additionally, turnover costs are not particularly effective in deterring speculation. One need only contemplate the fact that the real estate market, arguably the implosion most responsible for our present woes, has some of the highest turnover costs of any market to appreciate this point.
Moreover, one must be possessed of what can only be termed a "redistributive" disposition in order to favor taxes that are highly polarized with respect to the taxed and grafted constituencies. In the wake of the mortgage implosion, can we allow ourselves to tolerate any longer any form of targeted tax used to grant targeted largess? How has the trend away from such a system since 1986 treated us?
And by now, shouldn't we really recognize that taxes like this are really about the revenue? The tax before us, after all, is repeatedly described in terms of its revenue. We are told that a "$150 billion dollar tax is being levied on Wall Street." Have we not learned the folly of taxes designed to target what is presently a politically unpopular class (though not 5, nay, not 3 years ago it enjoyed the envy of the country) that look for justification to the generally fictional theory that the tax's effects will somehow be contained thereabouts.
The tax is likely to do considerable harm to the economy of the United States both in the long and short term.
The tax's proponents ask us to believe that "throwing a bit of sand into the gears" will have the effect of reducing volatility, increasing stability and generally solving the nation's ills. This requires a bit more than quite a bit of suspension of disbelief.
In the first instance, increasing turnover and transaction costs increases rather than decreases volatility and distorts pricing signals. This should be intuitively obvious to the members of this House, given their reputation for exceptional economic acumen.
Fourth, the tax is wholly impractical to implement.
Absent a worldwide regime to enforce the tax, market actors are free to move to Zug, Zurich or Singapore to conduct their trading activities and avoid the tax entirely. (Sweden eventually abandoned its own ill-advised 2% securities transaction tax- which included bonds after 1989- in the early 1990s after it destroyed transaction volume and liquidity in this way). Can we really find it in ourselves to support a measure that will drive transactions "off-exchange" just as we are trying to centralize clearing?
The phrase "$150 billion tax on Wall Street" should quite reasonably scream "$150 billion subsidy to foreign exchanges" to anyone in this House listening carefully. Let us not, in this age of digit inflation, forget that this annual figure could instead buy us 1.5 Dubais (or permit the present administration ten General Motors bailouts).
And finally, based on past performance, can this house in good conscience justify turning over another AIG bailout every year to the federal government to do with as it will?
No.
We must simply admit that this is folly and vote "Yea" on the motion presently before the House.
Thank you.
Tyler DurdenThe Case Against The Proposition
Mood of the House- Yeas Prior: 56 Subsequent:
"Reform must go beyond pious wishful thinking, to the core issue in our market economy — how to incentivize capital to go long term. The current system cannot achieve that result." - Ira Millstein, Weil Gotshal
It is somewhat painful to be mentioned within the same paragraph, let alone very next to the name of the one person who singlehandedly crushed the science of economics, by creating a thought experiment so mindbogglingly flawed and accepted at the same time, that all those who saw through and refuted it, would be immediately branded as idiots, tin-foil detritus, subhumans, toxic garbage, Maiden Lane III and Discount Window eligible collateral, etc. (and all those who saw it for the stealthy mid-to-upper class wealth redistribution mechanism had the sense to keep their mouth shut and profit from it). The man we refer to, of course, is John Maynard Keynes, and the topic under observation is the notorious Bloodthirsty Stay Puft Marshmallow Man Transaction Tax, most notably making headline news in the "Let Wall Street Pay for the Restoration of Main Street Act." While we have little intention of trying to change the minds of retail traders who believe Pattern MatchingTM in conjunction with a $20,000 retail trading account, and a 25% YTD P&L courtesy of money leaving from one pocket and entering into the other (less about 50-100 bps in slippage costs aka trading tolls, which have a much bigger impact on trading than any proposed transaction tax, not to mention brokerage fees), is the modern equivalent of Shangri-la, we would like to present an argument that while supported by individuals like Keynes, John Boggle, and Warren Buffett, in fact has merit not because of support from the deranged peanut gallery, but because of its fringe benefits of ridding the stock market of the high frequency trading trading toll scourge, which ends up costing society much more at the end of the day, and whose externalities go purely to the bottom line of a few select individuals who already likely have fractional ownership of several G-5's as well as private island timeshares. As such the ultimate benefit to society from an already implicit transaction tax, in the form of encroaching HFT slippage costs, and various other mechanisms that extract transactional value from the institutional base, would be explicitly better, as even Congress would be hard pressed to spend $50 billion a year without creating at least $0.01 of social value, which outcome would still be better than the HFT-toll dominated status quo.
And just in case the above paragraph was a tad distended and essayistic, and seemingly the "hypercognitive" product of some of our "east of the Atlantic" journalistic cousins, the core of the argument presented is that a transaction tax is a necessary evil whose sole purpose is not so much to create jobs (I dare Congress to refute my skepticism, although the whole Jobs created by losing 8 million jobs in addition to a fully thug-infested BLS manipulating data on a monthly basis, leaves me hope that there is no hope when it comes to Congress ever fixing something with its direct intervention mechanism) as it is to reduce, and ultimately remove the ever increasing presence of high frequency trading in capital markets, once again demonstrating that indirect benefits from Congressional action is the best we can hope for.
Zero Hedge has written extensively about the costs of High Frequency Trading: not only from the perspective of one of the most widespread algo strats that are employed in HFT transactions, i.e., VWAP, where our suspicions have been confirmed by independent studies indicating that HFT has in fact boosted transaction costs by several orders of magnitude to all those who willingly and unwillingly end up submitting their transactions via REDI or any other child order dissecting algorithm, but also the overall toll on trading that HFT imposes by providing "liquidity" which we quantify to be approximately $100 billion each year. Yet another topic we have highlighted repeatedly is that the liquidity provided by HFT is ironically in those stocks that need it the least: while we are grateful that AIG, FRE, FNM, C, and CIT can account for 30% of NYSE trading, it is i) completely unnecessary and merely a way for HFT algos to collect massive liquidity rebates, and ii) destabilizing for the overall market due to accented momentum blasts not based on any fundamental reasons, merely a function of collapsing volume and increasing marginal trader impacts . Like a true scavenger, HFT appears where it is least beneficial and where its massively leveraged models provide the best returns: i.e. wherever the dumbest money plays and where HFT can scalp pennies, billions of times a day, from the least sophisticated investors, to those who have no choice but to trade with Goldman Sachs et al. However, because it is not called a tax, and because it has ingrained itself into the revenue streams of so many various companies who would be loathe to bring attention to the entire concept of HFT ($100 billion a year is not pocket change, and until Zero Hedge decided to poke around early this year, those who were well aware of what HFT really is, knew full well it was best to keep their mouths shut and to continue depositing the "externalities" that their "liquidity provisioning" continued to generate straight into their bank accounts). It is time to break the back of the trading toll. Because while HFT generates $100 billion that goes purely to Wall Street beneficiaries, the tax, which we believe realistically would generate half the expected $150 billion a year, would still provide at least some financial backstop to an already bankrupt government (just wait until that elusive broken auction... you will then see not only transaction tax, but value added, Goldman, and even floor and corner office tax). Most importantly it would drastically reduce the revenue stream that is redirected to HFT operators whose churning trading strategies merely facilitate and enhance short-term speculation instead of promoting long-term capital formation and investment.
While discussing the pro-tax case, it bears pointing out to the female side of the Zero Hedge braintrust who may not have found the time to actually read the proposed bill, that it has some very notable provisions which would exclude any so-called retail daytraders, who apparently are most in arms against a trading tax, from being impacted by proposed legislation, whose direct focus, as expected, are the Wall Street recipients of trillions in taxpayer bailouts. As such the crutch in the opponents argument falls away: the vast majority of traders would not be impacted by any proposed tax. To wit, below are the exemptions which would result in no impact on those executing the trades:
- tax-favored retirement accounts,
- education savings accounts,
- health savings accounts,
- mutual funds and,
- the first $100,000 of transactions annually that are not already exempted.
Additionally, here is an example which has been strangely missing from the contrarian playbook:
A 60 year old couple with $500,000 in retirement funds, another $100,000 in Health Savings Accounts, $400,000 in mutual funds that cashed out any of it, would not pay any transaction taxes. If they also hold $200,000 in IBM stock, they still don’t pay any transaction taxes. If they sold half of their IBM stock in a year, they still don’t owe any taxes. If they sold all $200,000 of their IBM stock in a year, they would owe $250. This couple is generally held harmless by the tax, just like 99% of taxpayers who don’t speculate in financial markets.
Of course, there are those, who, like consummate gamblers, believe that betting on red or black a few hundred times each day is actually a viable strategy to make money (despite hitting double zero half the time). To all those we have five words: Form W-2G and Form 5754. Here is the IRS' opinion: "Gambling income includes, but is not limited to, winnings from lotteries, raffles, horse races, and casinos. It includes cash winnings and also the fair market value of prizes such as cars and trips. For additional information, refer to Publication 525, Taxable and Nontaxable Income." One wonders when stock market gains will be added as well. In a nutshell, the government collects gambling revenues at the highest tax rate allowed, and on most occasions ethical gamblers would part with half of their winnings (keyword being ethical). Of course very few do. Yet when E*trade logs every transaction, such avoidance is impossible. When stock trading and gambling are effectively the same, such as what transpires when momentum traders attempt to profit from the same statistical distributions as found on a casino floor, with no long-term investment motives, it is only fair to apply the same taxation approach to traders who shift away from normal investing and enter the realm of day-gambling in the legalized stock market casino.
Yes, but what precedent would taxation create? Well - we need to merely open the history books. The United States had a transfer tax from 1914 to 1966. The Revenue Act of 1914 (Act of Oct. 22, 1914 (ch. 331, 38 Stat. 745)) levied a 0.2 percent tax on all sales or transfers of stock. In 1932, Congress more than doubled the tax (0.4%) to help overcome the budgetary challenges during the Great Depression and WWII.
In 1914, when the first transfer tax was instituted, the Dow Jones Industrial Average (DJIA) was at 60. Despite this tax, the DJIA rose to 381 in 1929. When Congress proposed increasing this tax in 1932, the President of the New York Stock Exchange, Richard Whitney said the tax would:
- “seriously curtail, if not destroy our security markets.”
- “prevent investors from selling securities which they own”
- “seriously effect our banking system”
- “prevent American industry from acquiring new and necessary capital by security issues”
- “the result, inevitably, will be the liquidation of securities and declines in prices”
- “therefore, the destructive taxes on securities are a long step toward further continued deflation.”
Congress wisely chose to ignore those scare tactics in 1932 and increased the transfer tax. The result was a DJIA that rose from 41 (the lowest point during the Great Depression) to just under 1000 in 1966, when the transfer tax was eliminated, a 25 fold increase. In other words daytraders are now resorting to the old standby, Mutual Assured Destruction, a trope whose function was demonstrated to be so effective by both Wall Street and the Federal Reserve in the past year. And what do the facts show? Quite the opposite of what is claimed by all taxation opponents. Just the facts ma'am.
Moving away from the legislative, and focusing on the judicial, yields this bit of information:
Most state securities acts prohibit either excessive trading or churning. For example, under the Illinois Securities Law of 1953, there is an absolute prohibition against excessive trading. Under the Indiana Securities Act, churning is considered a “dishonest” or “unethical practice”. The specific Regulation under the Act reads as follows:
“Dishonest and unethical practices within the meaning of IC 23-2-1-11 shall include but not be limited to the following: (i) Switching or Churning. Knowingly effecting transactions in a customer account for the purpose of accumulating or compounding commissions."
Prohibitions on excessive trading are critical not only in the judicial realm but in the regulatory. FINRA itself provides three excessive trading definitions which fall along the following axes: i) turnover, ii) cost to equity, and iii) in and out trading and number of trades. Why should the criteria that are appropriate for FINRA in determining monetary disgorgement not be sufficient to conclude necessary and sufficient overtrading (and thus imposed taxation)? A third-party study finds that "average turnover rates for stock mutual funds with various investment objectives between .53 times annually and 1.45 times annually." More relevantly, "Most courts, FINRA arbitrators, the SEC and FINRA Enforcement now subscribe to what is known as the 2-4-6 Rule." The rule interpretation found that, "an annualized turnover ratio of two times the average equity in an account at a full service brokerage firm like Robert Baird, Ameriprise, Linsco Private Ledger, JP Morgan Chase, Morgan Stanley, AIG, Edward Jones, or Raymond James, created an inference of possible churning." Additionally, "An annualized turnover rate of four created a presumption of excessive trading in FINRA arbitration churning claims, and a rate of six times annually created a conclusion of excessive trading." What is amusing is that today, daytraders far exceed even the maximum annualized turnover rates in stocks of their choosing. And while one of course can not find traders guilty of anything when trading under their own free will, one can at least attribute to pathological churning some of the elements of habitual gambling that the IRS seems are sufficient to demand 50% taxation. A 200-1 taxation ratio does not seem too inequitable all speculative things considered. Others who find this ratio appropriate are the following:
- John Bogle, founded Vanguard in 1974, and served as its CEO for the next 22 years.
“I would like to express my long-standing and continuing support for a transfer tax on securities transactions, primarily as a way to slow the rampant speculation that has created such havoc in our financial markets, but also for its revenue-raising potential in this time of staggering government deficits. So I endorse the Harkin-DeFazio bill in principle, even as I would urge that careful study be given to the appropriate level of tax rates and its applicability to various types of investment accounts and financial institutions.” - Paul Krugman, Nobel Laureate Economist
“It would be a trivial expense for long-term investors, but it would deter much of the churning that now takes place in our hyperactive financial markets.” - 200+ Economists Letter
“The cost of trading financial assets has plummeted over the last three decades as a result of computerization. This has led to an enormous explosion in trading volume, with most trades having little economic or social value and redistributing disproportionate resources to the financial sector. A set of modest financial transactions taxes, which would just raise trading costs back to the level of two or three decades ago, would have very limited impact on trades that have real economic value.” - Overcoming Short-termism. Aspen Institute. Sept. 9, 2009 signed by a number of significant business leaders, including John Bogle, Warren Buffett, John C. Whitehead (former [but not current] Chairman, Goldman Sachs), Louis V. Gerstner, Jr. (former CEO of IBM,) Richard L. Trumka (Secretary-Treasurer, AFL-CIO), Peter G. Peterson (Chairman and Founder, Peter G. Peterson Foundation), Ira Millstein, Weil Gotshal senior partner, Felix Rohatyn and many others. Their first recommendation includes: “implement an excise tax in ways that are designed to discourage excessive share trading and encourage longer-term share ownership.”
Taxation opponents point out that an established trading tax in the US would scare trading to foreign markets. Yet the thing they fail to mention is that at the most recent G-20 meeting, it was only the US, in the face of Tim Geithner, who was against such a tax: both Gordon Brown and Jean-Claude Trichet, not to mention the rest of socialist Europe are already fervent supporters of a transaction tax. Mr. Geithner is the gating factor to the game theory scenario being complete. And while he is to date the only defector, his most recent Bloomberg TV appearance indicates that even he may soon be changing his tune. Even the ruling party seems set on converting Mr. Geithner to the fold of Main Street contempt, when Nancy Pelosi recently announced that the transaction tax idea has a "great deal of merit."
Yet with even so many proponents, those who believe they would be hurt the most by a transaction tax are willing to perpetuate the abovementioned HFT toll, simply because they do not see the 0.25%/trade in their bottom line, even as each trade provides infinite frontrunning abilities to those who constitute the higher tier in the capital markets. Alas, the fact that HFT is gradually externalizing more and more capital out of the market, and will continue doing so until such point as only HFT is left trading with itself, in the one last most liquid stock, and then there is nobody left trading at all, seems completely lost on the daytrading brigade. All this is occurring even as the stock market has become a playing field where the steroid laden Barry Bondses of the world take the naive daytrading enthusiasts for the proverbial ride day in and day out, and not only pick the equivalent of the transaction tax annually but create a market that is practically untradeable.
In a world of comparative evils, secondary derivative inflection points, and "less badness," a transaction tax is bad, but, to quote CNBC, is "less bad" than the opposite: the persistence of the HFT toll, whose quid pro quo of increasing slippage costs in exchange for liquidity, where it is least needed, or not needed at all, yet shoved in the public's face as some altruistic motive, has to end. And courtesy of feeble regulators, and a Wall Street complex that has penetrated deep into every branch of the legislative and judicial system, and will do anything it needs to continue its $100 billion-a-year extracting ways, the only way to bring back normalcy to the market is by reverting to the lowest common populist denominator. Whether Congress will disentangle itself eventually is unknown - it would be naive to assume that a transaction tax will be removed voluntarily in due course by the current administration. However, the one thing that is certain is change. And as the current administration is on collision course with massive electoral disappointment at both mid-term and the next presidential elections, it is likely that the rules will change once again quite shortly. However, if in the meantime, the current administration can get one thing right, which in this case is the wounding of the HFT monster, by whatever means necessary, we will take it, even if it means awakening that other monster- trading tax. And as presented facts above demonstrate, that particular monster may just not be as scary as all the M.A.D. fearmongers would like to make it appear.
Marla SingerThe Rebuttal For The Proposition
Mood of the House- Yeas Prior: Subsequent:
Tyler DurdenThe Rebuttal Against The Proposition
Mood of the House- Yeas Prior: Subsequent:
Marla SingerThe Closing For The Proposition
Mood of the House- Yeas Prior: Subsequent:
Tyler DurdenThe Closing Against The Proposition
Mood of the House- Yeas Prior:
Notes:
This house believes a per-trade "transaction tax" on investors will do more harm than good.
How do you answer?
(Vote or change your vote at any time- including before the proponent's case is submitted. To propose future topics email marla@zh).
»
- Login or register to post comments
- Printer-friendly version
- Send to friend
on Sat, 11/28/2009 - 18:55
#145017
Brilliant 100%
No really scrap income taxes and have a transaction tax.
I know who would benefit at the end of the day!
on Sat, 11/28/2009 - 21:44
#145153
just do the tax. We should not think about things too much. More doing and less discussing. Think about it, every time we examine, debate, discuss and analyze these kind of things, they always flop. Just skip the whole first step. Then, if it flops, we can all say that at least we didn't waste too much time on it. But maybe it won't flop, then we can say we improved productivity.
on Sat, 11/28/2009 - 23:18
#145205
I hope that is tongue in cheek
To me this would be smoot hawley part deux. I know my reaction both for philosophical and practical reason would be to move all my investing capital abroad. Opportunities in Canada, Australia and others would start looking really good.
That giant sucking sound you would hear would be capital flight out of the US. If you rightfully hate GS and the bailouts simply call in all the money including the money laundered to GS via AIG and let the chips fall where they may. That sure beats the hell out of kicking the piss out of middle class investors/traders, destroying US based capital, our financial system and the economy with it.
on Mon, 11/30/2009 - 17:35
#146834
http://www.bloomberg.com/apps/news?pid=20601109&sid=atVAGbpceQ_g&pos=10
on Sun, 11/29/2009 - 01:20
#145250
"What luck for rulers that men do not think." Adolf Hitler
We could just save time if the gov't just withheld 100% of incomes and redistributed, to those most in need, what was left over after the cost of smart-bombing weddings in countries our citizens can't find on clearly marked maps in their first language.
on Sun, 11/29/2009 - 02:19
#145270
what we really need is an attempted transaction tax.
on Sun, 11/29/2009 - 09:22
#145321
ROFL, yes that would hit GS where it really hurts!
on Sun, 11/29/2009 - 16:40
#145554
Are you kidding? This will only hurt the little guy. The big players make loop holes and driving out the little guys will pay for their loop hole costs.
on Sun, 11/29/2009 - 14:07
#145447
Careless Whisper - BRILLIANT!!! +100
on Mon, 11/30/2009 - 09:21
#146134
Des pissenlits par la racine! A fake transaction tax would root out flash and high-frequency trading schemes designed solely to milk/trick the stock exchange system and hold-up the investor class. The highway robbery and the false bid or ask tax would cancel, since once it became unprofitable the scum would melt back into the broth.
For example, two cancellations in ten seconds would generate a five cent per 100 share tax. Game Over.
on Mon, 11/30/2009 - 10:09
#146184
Yes - it would.
It would also stop most trading.
People do not post limit orders aggressively (i.e. with small bid/ask spreads) if they are unable to quickly and cheaply cancel those orders when market conditions have changed.
There would still be limit orders posted to the books, but they would be posted with wide enough spreads to cover the added risk of the markets moving against the orders, which means that they would be posted with relatively large spreads.... and most trading would cease.
on Mon, 12/07/2009 - 04:56
#155069
It's not people. It is computers for which time is so essential they have to be placed as close as possible to the exchange. Ie decisions generated and cancelled in 100ths of seconds.
As all the big banks all play, presumably somebody else pays. Most likely those who do not hold or sell positions for three seconds If it can be made useless for the banks to play, maybe it would be one less use of capital, and one less reason for leverage.
on Mon, 12/07/2009 - 09:01
#155142
When positions are held for seconds (or even hours), leverage is not really needed.
You can turn over a portfolio of billions of dollars daily with trivial amounts of capital, so you may hate HFT but it can't be due to the high leverage employed.
on Mon, 11/30/2009 - 12:13
#146308
Transaction hijacker tax?
on Mon, 11/30/2009 - 18:11
#146881
Excellent! An in depth description of the legislative process in just a few sentences.
Indeed, just do it. They can accept more bribes in the future when the special interests seek to "adjust" the law. Revenue maximization and such.
on Mon, 11/30/2009 - 11:14
#146251
Agreed. Scrap the income tax, put in place a Goldman-Sachs tax (Tobin Tax) AND do a solid by killing off $@!*!#*^! DAY TRADERS and similar vermin.
Also, institute a sur tax on the wealthy to pay for the benefits of society that allowed them to become wealthy in the first place (workers are included in societies benefits that are REQUIRED for someone to ever get rich while themselves avoiding actually doing any work themselves...thus they must pay back for their disgusting laziness).
on Fri, 12/04/2009 - 13:57
#152715
The tobin tax makes no sense as it effects everyone and it would have to be an international tax to be effective.
I believe the windfall tax would be more effective.
As for the sur tax...spoken like a truly misinformed sheep.
I paid over $100k in taxes last year. How much did you pay?
I don't say this to belittle you in any way, I say it to prove a point.
We use the same roads,water/sewer and schools (if I send my kids to private school, I still have to pay for the public school in my town.) On a citizen level, we are the same. Take a look at the following link for a visual rep of who pays for america.
http://www.ritholtz.com/blog/wp-content/uploads/2009/11/MINT-TAXES-R2.png
Reminds me of story I once read:
Suppose that, every day, 10 men go out for dinner and the total bill comes to $100. Suppose, too, that they decide to pay the bill the way we pay our taxes.
This is what happens:
The first four men (the poorest) pay nothing.
The fifth pays $1.
The sixth pays $3.
The seventh pays $7.
The eighth pays $12.
The ninth pays $18.
The tenth man (the richest) pays $59.
The 10 men are happy with the arrangement. But then, one day, the owner of the restaurant throws them a curve. "Since you are all such good customers,"
he says, "I'm going to reduce the cost of your daily meal by $20." Dinner for the 10 now costs just $80.
The group still wants to pay their bill the way we pay our taxes, so the first four men are unaffected. They still eat for free. But what about the other six men - the paying customers? How do they divide the $20 windfall so that everyone gets his "fair share"?
They realize that $20 divided by six is $3.33. But if they subtract that amount from everybody's share, the fifth and sixth men would end up being paid to eat their meals.
So the restaurant owner suggests that it would be fair to reduce each man's bill by roughly the same amount - and he proceeds to work out how much each one should pay.
And so:
The fifth man, like the first four, now pays nothing (a 100% savings).
The sixth now pays $2 instead of $3 (a 33% savings).
The seventh now pays $5 instead of $7 (a 28% savings).
The eighth now pays $9 instead of $12 (a 25% savings).
The ninth now pays $14 instead of $18 (a 22% savings).
The tenth now pays $49 instead of $59 (a 16% savings).
All six of these men are now better off than they were before. And the other four continue to eat for free. But once outside the restaurant, the men began to compare their savings.
"I only got a dollar out of the $20," declares the sixth man. He points to the tenth man, "But he got $10!"
"Yeah, that's right," exclaims the fifth man. "I only saved a dollar too. It's unfair that he got 10 times more than me. "
"That's true!" shouts the seventh man. "Why should he get $10 back when I get only $2? The wealthy get all the breaks!"
"Wait a minute!" the first four men yell in unison. "We didn't get anything at all. This system exploits the poor!"
The nine men surround the tenth and beat him up.
The next night, the tenth man doesn't show up for dinner, so the nine sit down and eat without him. But when it comes time to pay the bill, they make a disturbing discovery. They don't have enough money between all of them to cover even half
of the bill.
And that is how our tax system works. The people who pay the highest taxes get the most benefit from a tax reduction.
Tax them too much, attack them for being wealthy, and they just may stop showing up.
In fact, they might start eating overseas, where the atmosphere is somewhat friendlier.
My point.... I already pay.....
on Mon, 12/07/2009 - 09:06
#155149
Nice analogy, but reality is as follows:
A meal costs 2 dollars and everyone must pay 2 dollars to eat. I call this captialism. You're an overacheiver (or you were born with a golden spoon) and you decide to pay 10 dollars to eat.
Some people cannot afford 2 dollars to eat.
In the good old days, the poor would form mobs and take all of your money and eat. Today, the government takes 1/3rd of your dollars and gives it to the poor so they don't form a mob and take all of your money.
That's the value of taxation.
on Thu, 12/10/2009 - 14:00
#159251
There would be many less "poor" if we had s strong system of property rights, as they would work and contribute... look at most riots/revolutions in history (the kind that you think justify taxation)... they came about in a context of HEAVY government intervention.... so your reasoning is flawed.
on Sat, 12/12/2009 - 13:24
#161271
Consider that all 10 men work for the same company. They are all smart and hard-working but one guy is exactly 1 IQ point smarter than the others. The others call him 'Boss'.
Boss decides to give himself 50% of all company profits because he is so much smarter than the rest and adds so much more value than the others. He pays 20% of the company profits to his next-in-command. The other 8 get what's left.
Yes, Boss is the smartest. But the additional compensation he has awarded himself is completely out of whack with the additional value he adds.
This is the result of our current economic/corporate structure. This is why the rich get richer and the poor get poorer.
Additional taxation is not the answer - that just gives more money to the demagogues and bureaucrats who are good at squandering and not much else.
The solution is reform of corporate legal structures to narrow the wealth and income gap between the rich and poor.
on Mon, 03/08/2010 - 17:59
#258348
You paid 100K last year...thanks for letting us know some of your docs...now, can you tell us how much you made?
Here's some of my copypasta
The Case for Progressive TaxationBy Juan Carlos Ordóñez
Adam Smith, the father of capitalism, walked with Jesus in at least one respect: his support for progressive taxation. That’s the principle that taxes should be based on ability to pay.
Echoing Luke Chapter 21’s message that a few pennies from a poor woman's purse costs her more than many pieces of gold from a rich man's horde, Smith wrote in The Wealth of Nations, “It is not very unreasonable that the rich should contribute to the public expense, not only in proportion to their revenue, but something more than in that proportion.”
But these days unreasonableness stirs in the minds of some, who complain that the rich pay the lion’s share of all taxes. The proper response to such a complaint is, “that’s how it should be.”
Progressive taxation corresponds with our values. We understand that a dollar in taxes costs a poor person much more than a dollar from a rich person. For a poor family, more money paid in taxes means foregoing food, heating, a car repair or other basic necessities. But for the wealthy, paying more in taxes does not diminish their comfort. They have the ability to pay more.
And yet today you’ll hear some argue that Oregon’s tax system is unfair to Oregon’s wealthiest. They usually cite a statistic that the wealthy pay an outsized share of tax collections.
That’s not surprising, considering how skewed Oregon’s income distribution has become. In 2007, the wealthiest 1 percent of Oregon households took in nearly 19 percent of all income in the state.
But more importantly, that the wealthy pay an outsized share of total income taxes tells us nothing about the fairness of the tax system.
Consider the following hypothetical scenario, a state with three taxpayers: Household A earns $20,000 a year and pays $4,000 in taxes. Household B earns $40,000 and pays $6,000 in taxes. And Household C earns $250,000 and pays $25,000 in taxes.
The unreasonable crowd would complain that the wealthiest third is paying more than two-thirds of all taxes. But when you consider what percentage of their own income each pays, you find that A pays 20%, B pays 15%, and C pays 10% of his income. So when you measure the relative burden on each household, it’s clear that the lowest income earner has the biggest burden. It’s a tax system not based on ability to pay. It’s a tax system that asks more of the poor than of the rich. It violates the principles set forth in Luke and The Wealth of Nations, asking more of the poor and, unreasonably, letting the rich off the hook.
Sadly, while it is hard to deny that a progressive tax system is the only fair tax system, Oregon fails to live up to that standard. True, our state income tax is mildly — “meekly” might be more accurate — progressive. But when all state and local taxes are factored in, the regressive nature of our tax system becomes evident.
Today the poorest fifth of Oregon households — with an average yearly income of about $10,000 — pay about 8.7 percent of their income in state and local taxes combined (income taxes plus excise taxes such as gas and cigarette taxes and property taxes and fees, less the federal offset for itemizers). By contrast, Oregon’s wealthiest 1 percent of families — with average income of over $1 million — pay about 6.2 percent in state and local taxes.
Measures 66 and 67 on the January ballot would nudge Oregon’s overall tax system toward progressivity. If Oregonians vote “yes” to approve these targeted tax increases on corporations and high-income Oregonians, the wealthiest 1 percent would be pushed up slightly, paying 6.6 percent of their income in state and local taxes combined, still less than what the poorest families pay.
Thus, Measures 66 and 67 are a step toward Adam Smith’s more reasonable tax system. They would get us closer to a system that acknowledges the difference between a poor person’s purse and a rich person’s horde, asking the latter to contribute more.
Juan Carlos Ordóñez is the communications director of the Oregon Center for Public Policy.
http://www.ocpp.org/cgi-bin/display.cgi?page=cp0911ProgTaxati
How much did I pay? Answer I don't give out docs.
tj3
on Mon, 11/30/2009 - 12:54
#146338
Consider the Constitutionality of the Federal Reserve
Note (only gold and silver legal tender)and Income
Taxes (only uniform direct taxes).
Millions are dropping out of the grid to thrive.
The Beast will not die until it is starved out of
existence...
on Wed, 12/23/2009 - 23:10
#173447
Tell Congress to Block the Trader Tax.
This tax will put most traders out of business!
Sign the Petition here>>http://tinyurl.com/b3lkun
on Mon, 03/08/2010 - 18:01
#258355
This will put you out of business? <eyeroll>
on Sun, 03/14/2010 - 16:12
#265187
I would like to see all taxes repealed - except for two;
A transaction tax, and a tax on net assets.
The idea of taxing production is stupid - only hoarding and shuffling should be taxed.
I also think each state should make everything itself - and import only commodities which it doesn't have, and idea's and knowledge - no imports. Pay for imports using only renewable commodities - do not export anything that is not renewable.
on Sat, 11/28/2009 - 18:58
#145019
The problem is that the Government will never cancel a tax so dont count on substituting 1 tax with another
on Sat, 11/28/2009 - 18:59
#145021
Transaction tax
Goldman Sachs
The squid must die
on Sat, 11/28/2009 - 19:26
#145050
It will be structured so the big boys don't pay...this is a 'pound the individual investor' tax.
Banning flash trading is a whole seperate issue.
on Sat, 11/28/2009 - 20:38
#145114
Do you really think GS is not going to be exempted?
on Sun, 11/29/2009 - 11:17
#145351
Of course Goldman Sucks is tax exempt.
GS is a church... The Profit Lloyd Blank-dick said so, remember? God's work? If that ain't a bid for church tax exempt status a la Scientology, I don't know what is...
on Sat, 11/28/2009 - 20:58
#145129
Ooh, bet you're wond'rin' why they're caught
Damn those CDOs they just bought
With Jimmy Cayne we knew before
Between the two of us, we took down more
It took them by surprise I must say
When I found out yesterday
Don'tcha know that I
Heard it through the Blankfein
Now we've all submerged with subprime
Oh, oh I heard it through the Blankfein
Now he's surely lost his mind
Money, money--yeah
Money, money--how much longer 'til he does time
on Sun, 11/29/2009 - 04:49
#145282
May I properly finish a good start of CCR/Fogerty?
Blanky's sentence is:
You just take em out to the swamp,
tie em to a stump
and let the alligators do the rest.
from Brother Charlie Daniels "Simple Man"
Then we put the Mark Pittmans of the world in charge.
on Sat, 11/28/2009 - 19:08
#145028
This depends on implementation so much it is almost impossible to call. Do primary dealers pay the tax? Does government pay it for issuing their obligations? If we invent a new tax, lets use it in an innovative way, not to patch over holes left by the previous ones. I am all for collecting this tax, but i want it to go to a fund of all trading parties, not to some puny government. Yes, in an utopian world where humans act rationally 'for the greater good' it would work. In reality, this would probably just drive speculators away and give the govporate cronies another way of screwing the little guy over. Yea wins but reality still sucks.
on Sun, 11/29/2009 - 03:22
#145278
there are many reasons pro and con
bottom line is that this is a tax
this govt does not need more money
this govt needs to stop spending money
on Sat, 11/28/2009 - 19:08
#145029
There should be no "free lunch". Goldman Sachs makes everything more expensive for everyone in world. No more free lunch. Time to tax the transactions.
on Sat, 11/28/2009 - 19:28
#145052
You're kidding yourself if you think GS won't find a way to circumvent.
on Sat, 11/28/2009 - 22:31
#145177
Not only will they find a way to exempt themselves from it, they'll figure out a way to profit from it.
I for one welcome our new squid overlords...resistance is futile!
on Sat, 11/28/2009 - 23:42
#145216
I would like to come up with something clever to refute your comment, but I am afraid I will have to agree with you. How could this be done? By giving GS an exemption, just like it got with energy trading. At first GS might even play along and show how they are helping to build America. Then Barney Hitler Frank will stick some piece of shit rider on a bill that saying that if a company is "too big to fail" then it will be exempt.
on Sun, 11/29/2009 - 10:23
#145337
Agreed.
And if GS tried to exempt themselves, there would be public outcry. GS is the bad guy and nobody would dare to face voters who are looking for blood by giving GS another gift.
on Sat, 11/28/2009 - 19:10
#145031
Cut the baby in half: one basis point tax on all electronic debits originating in the United States.
Use a credit card or an ATM card: one basis point. Wire funds to Switzerland, oops, I mean the Cook Islands: one basis point. Bang out a quick HFT trade: settlement will cost you one basis point.
Pay cash: no basis points, but your transaction will ensure job security for AML counsel and staff.
on Sun, 11/29/2009 - 00:12
#145226
Taxes are good, we must support the system.
Ooops I just threw up in my mouth a little.
on Mon, 12/07/2009 - 01:01
#154992
+1
They never get rid of the taxes once implemented. A poster above mentioned going off the grid. Gold can help there.
on Sat, 11/28/2009 - 19:15
#145032
I am for a transaction tax that will be refundable quarterly if an entity makes less than 100 transactions per portfolio/account & or if total assets under the management are below 30 ml.
So where do I sign?
Besides, since the GS & Co will figure out a way to pass such a tax onto their customers, what is the point?
I' tend to believe it's more harmful. If we do want to fairly redistribute WS excesses, we have to eliminate all personal tax deductions for individuals making above 250K with the exemption of Charity deductions.
on Sat, 11/28/2009 - 19:11
#145033
All taxes are bad. I rather have less government and less welfare.
on Sat, 11/28/2009 - 19:21
#145045
that's what GWB & Co' claimed, as the result the level of inequality is all time high. Because let's face it the wealthier you are, the more able you to take an advantage out of tax cuts.
We need smart government that does not create inefficient & unsustainable expenditures and smart tax legislation that is as fair for all as possible.
on Sat, 11/28/2009 - 19:29
#145053
Not only that, but many people in this country today are wealthy because of government. Everybody in the defense/spy/prison/homeland "security" industry. Farmers who get price supports. Real estate and building businesses which get free infrastructure to connect their projects to their customers. Even tourist businesses which get advertising subsidies. Doctors, hospital owners, insurance company owners and execs, and the attorneys who sue them, all of whom enjoy a steady stream of patients thanks to Medicare. On and on....
on Sat, 11/28/2009 - 20:52
#145125
Poorly executed small govt policies do not an ideology make.
on Sat, 11/28/2009 - 20:57
#145127
a fine concept indeed, but you wont get it under our present democratic structure where the bias is always to pander to the majority and to the needy and greedy. Starve the beast.
on Sat, 11/28/2009 - 22:26
#145174
"Smart government" Now there's a young person's oxymoron for ya.
on Sun, 11/29/2009 - 07:56
#145302
there are lots of arguments for and against.
bottom line, the tax would give more money to this gov't.
this gov't does not need more money to spend.
this gov't needs to spend less money.
on Sun, 11/29/2009 - 16:10
#145526
^5
on Sat, 11/28/2009 - 19:14
#145036
Anyone who thinks GS will pay this tax is ignorant. There will certainly be a loophole or exemption for market makers and/or liquidity providers and/or giant vampire squids. As always, the tax will only hurt the politically disconnected.
on Sun, 11/29/2009 - 10:54
#145346
I think you're wrong.
Since the tax seems to be aimed precisely at GS, I can't see them being exempt without public outcry. And an election is coming.
on Mon, 11/30/2009 - 06:57
#146053
Might I suggest a Username for your ZH experience: Ignorant1.
on Sat, 11/28/2009 - 19:18
#145037
For some reason I can't see the debate, neither the cases for/against nor the rebuttles. Nothing comes up when I cursor over the subtitles.
on Sat, 11/28/2009 - 20:17
#145096
I think that they are trying to get a feel for the consensus of the crowd as they work their way through the debate. Most likely the points will be put up in some form of "frequently".
on Sat, 11/28/2009 - 19:16
#145038
Then what about those people who trade with less than 50k?
on Sat, 11/28/2009 - 19:17
#145039
must we tax everything. you can't work diligently to find solutions to problems, so you mindlessly, yet again, to tax your way out. brilliant
on Sat, 11/28/2009 - 19:18
#145040
now the trade of paper for better paper will create REAL value. It appears there is still a disconnect. at the beginning it all starts with someone shoing a horse, raising cattle and deriving eneogh profit to begin a bank.
town grows and prospers, now we have more banks due to our industry. Soon investment banks and other financial industry grows to meet the demand.
todays industry has shrunk to a double wide, and the finacials empirestate building is on our roof!
For anyone who didnt get it, the manufacturing roots and trunk are gone ,leaving the limbs of finance unsupported.
ZH. Thank you for allowing me to post with 0 kaptcha
on Sat, 11/28/2009 - 19:21
#145043
Reprising my earlier comments ( http://www.zerohedge.com/article/frontrunning-november-19#comment-135677 , http://www.zerohedge.com/article/transaction-tax-becoming-distinct-possibility-does-it-bring-benefits-table#comment-136651 ):
Aye: A tax on large financial transactions will help to stymie the finance industry's game of generating large and increasing numbers of financial transactions on any given amount of real wealth - because, of course, it's paid by the transaction. What other measures are there that might possibly reverse the process?
Noe: A tax on large financial transactions will just cut the government (further) in on the game, giving it an (increased) short term incentive to keep the game going. Public-sector trade unions and other government beneficiaries will enjoy the same incentives.
Discuss.
on Sat, 11/28/2009 - 19:21
#145044
Yes
Couple of suggestion.
1> If total buying and selling transaction amount below certain amount ( say $1million ) per year get exempted from taxes.
2> If one hold it for certain years (say 10 years) the tax is refunded.
3> For transaction not done in public exchanges ( e.g. dark pool and CDS ) the tax should be twice with no exemption.
By doing this small time retail player and 401K funds will have less impact.
on Sat, 11/28/2009 - 22:59
#145190
3> For transaction not done in public exchanges ( e.g. dark pool and CDS ) the tax should be twice with no exemption.
Make that tax 100 times more!
on Sat, 11/28/2009 - 23:06
#145197
I'm pretty sure you can count. I am a very small investor. I am in and out daily. My daily fuund is $150K. I hit your million mark on day 7.
Thanks. I need to pay more taxes.
on Sun, 11/29/2009 - 11:12
#145349
So, exempt individual funds under 500K and IRAs.
on Sat, 11/28/2009 - 19:22
#145046
There should only be a tax on extremely short term trades. Lest we forget, the theoretical purpose of financial markets is to efficiently allocate capital to the most deserving entities, not to provide a form of legal gambling (I know, I know, what a quaint idea). Clearly buying and selling the same security in the same day is not an attempt at allocating capital; it is an attempt at gambling or momentum following or arbitrage or something else, but certainly not fundamentals.
There should be a transaction tax inversely proportional to the length of the round trip trade. If you hold the security for more than 2 years, zero tax. Between 1-2 years, 5% tax. 0.5 to 1 year, 10% tax. 0.25 to 0.5 years, 20% tax. And so on, until we get to round trip trades completed in less than an hour, 80% tax. Round trip in under a minute, 99% tax.
PS this "transaction tax" should then replace cap gains tax.
on Mon, 11/30/2009 - 19:48
#147001
WOW - I can only hope you're kidding.
The insanity of what you are proposing will hit you right between the eyes on the day that you decide to sell your stocks and find out that there is nobody that will take the other side of your trade.
on Wed, 12/09/2009 - 19:44
#158437
The function of financial markets is price discovery. Investors allocate capital.
Some of us are so old we can even recall when share prices were quoted in eighths of a point, spreads could be 3/8 even on a fairly active stock, brokerage fees were orders of magnitudes greater than they are now, and markets in general were not nearly as efficient. I happen to like things the way they are now, with penny spreads and never a problem finding someone to take the other side of a trade. This tax has the potential of returning us to the bad old days.
Just my opinion, but I am pretty sure that everyone, large or small, trader or investor, will wind up paying ten times over for it, one way or another.
on Sat, 11/28/2009 - 19:23
#145047
When will we be able to see your cases for and against?
on Sat, 11/28/2009 - 19:23
#145048
tax me for having a big penis then....this is getting ridiculous
on Sat, 11/28/2009 - 19:27
#145049
will u tax me if i short brando's johnson?
on Sat, 11/28/2009 - 19:48
#145077
You mean like Lorena Bobbit shorted her hubby's Johnson?
on Sat, 11/28/2009 - 20:17
#145095
Isn't that last name something? Bobbit.
on Sat, 11/28/2009 - 20:49
#145121
brando's bobbit bails out bernanke's bubbles behind obama's bobbles
say that 3 times fast...
on Sat, 11/28/2009 - 23:57
#145217
OK,
Brando's bobbit bails out bernanke's bubbles behind obama's bobbles while King Kong plays Ping Pong in Hong Kong, with his Ding Dong!!
Say it once slow.
on Sat, 11/28/2009 - 19:32
#145058
Your probably safe there...
on Sat, 11/28/2009 - 19:44
#145070
I think you guys are stretching this to far.
on Sat, 11/28/2009 - 19:52
#145081
His penis?
on Sat, 11/28/2009 - 20:02
#145085
Your imagination may come in handy..
on Sat, 11/28/2009 - 20:34
#145112
I felt that avatar coming on. Since you have it out, I will offer the following answer to Tip e.'s question, here:
If you short it and Brrando goes long, we would tax you both.
Geopol: Maybe I should be a Gracie Allen to your George Burns?
on Sat, 11/28/2009 - 21:19
#145138
MsCreant,
I wouldn't join an act that would have me as a member.Ya, I know, but I have to stay true to my avatar.
My next gig is at Susie's Surprise bar in Bangkok, no taxing on trades there
on Sun, 11/29/2009 - 00:29
#145231
you said 'member'.
and 'Bangkok'.
on Sun, 11/29/2009 - 09:48
#145326
Your unveiling my subtleties
on Sat, 11/28/2009 - 19:29
#145054
the tax issue & related debate has been hijacked for the advantage of few. The benefits of tax cuts in the last 25 years were minimal for the middle class while were huge for the upper class. The whole tax cut issue has been used to get votes while producing little or no actual benefits for the middle class. If anyone needs evidence, loot at the inequality & social mobility studies in the past 25 years.
Fool us once, shame on you, fool us dozen of times shame on...
on Sat, 11/28/2009 - 20:34
#145110
The root of the problem of Goldman Sachs was the TARP bailout - without that, they wouldn't be in existance any more. But, that's over and done with, so now we should admit our mistakes and figure out how to prevent them from happening again. Targeting Goldman Sachs, now, after we've bailed them out, WILL NOT HELP ANYTHING. All it will do is give jacobinite pleasure to the common person who has animus against "bankers". Bankers aren't the problem though; the politicians are.
Instead of passing a new tax, why don't we pass a constitutional amendment prohibiting ANY AND ALL BAILOUTS of any private firm. Make the language very clear. Don't worry about Goldman Sachs, they took our money, sure, but our government gave it to them. Be angry at the government, since they are source of the problem.
on Sat, 11/28/2009 - 21:12
#145136
Politicians and the Fed are owned and operated by the same people.
on Sat, 11/28/2009 - 22:36
#145179
Why don't we as a Zerohedge nation just insist that Barney Frank, as an example, be voted outta office for supporting the bailouts. If we can focus on just one of these prime nitwits and GET THEM OUT, we have a chance to send the right message to the dildos in Washington WHO AREN'T LISTENING.
on Sat, 11/28/2009 - 19:30
#145055
I prefer an inactivity tax. You can't just sit around the casino and do nothin'.
If you have a net worth above $200 and more than 50% of your net worth is idle your entire net worth get's taxed.
And I want to see stronger regulation on those check cashing stores. You Mexicans can run but you can't hide.
on Sat, 11/28/2009 - 19:30
#145056
A small tax levied against shares purchased or sold would be a windfall for the Treasury and make HFT less profitable for GS. Most other purchases are taxed, why exempt shares?
on Sat, 11/28/2009 - 19:33
#145061
Because after lobbing efforts by out financial overlords, the cost will be bared by pension funds and the small, regular investors. It will only work, if the exemptions for those groups are made.
on Sat, 11/28/2009 - 23:15
#145203
Yeah that is the real trickle down economics. Make the plebs pay for it!
on Sat, 11/28/2009 - 21:20
#145141
Stock sales are already "taxed" via Section 31 fees that are used to fund the SEC. Please note.
on Sun, 11/29/2009 - 07:37
#145297
Now there is a waste.
on Sat, 11/28/2009 - 19:31
#145057
There should be a transaction tax, however, all those
earning less than $250K/year should be eligible to
claim a tax credit equal to all transaction taxes paid.
on Sat, 11/28/2009 - 19:32
#145060
Any transaction tax will be put into the software models, and the same computers will make the same trades that they currently do, except that the bid/ask spreads will widen to account for the lost revenue due to the tax (this is no different than the calculations about exchange fees / SEC fees etc...).
The net result is that on average, spreads will widen by roughly the amount of the tax. As such, the people who get hurt are not only the HFT / market makers who suffer due to lower expected transaction volume, but the retail investors who end up paying wider spreads on every transaction (due to the market makers paying the transaction tax), the transaction tax, as well as higher FINRA+SEC fees, as these too go up per transaction as total transaction volume drops (i.e. the SEC is going to get the same money regardless of how many shares trade hands per year, so everyone including retail pays more per share as volume drops).
If that were not bad enough, as spreads widen on all but the most liquid of names (I believe that most Dow components would still have 1 penny spreads, along with the frantic names on Nasdaq - but not much else), there will be an even worse distribution of capital in the public markets to companies, since a herding mentality based on reduction in spread costs would further inflate heavily traded names at the expense of less liquid stocks.
Much better to just tax the trading profits and leave the actual trades alone... since taxing the profits does not alter the market participants bid and ask prices.
I know nearly everyone on this blog hates HFT - but if you enjoy all time historic low trading costs and tight spreads (1 penny spreads on many equities and 1/2 penny all-in commissions available to retail traders), don't take them for granted. You're not going to get more money out of the likes of GETCO on a per transaction basis without having those same costs ultimately passed on to retail.
on Sat, 11/28/2009 - 21:12
#145135
You may catch your fair share of flack here... but you hit the nail on the head on this issue. Great post.
on Sat, 11/28/2009 - 23:07
#145178
I agree with the concept that any taxes are ultimately passed along to the consumer resulting in higher prices, so I would be against any increase in taxes.
However, we could consider state and federal RICO racketeering lawsuits, fraud lawsuits, and monopoly anti-trust actions (YOU KNOW, ENFORCE THE LAWS WE HAVE) as a tax targeting the evil doers instead of pulling us all into another tax net. The penalties have to be well in excess of the gain from cheating the system - a $1m fine per day on a scheme that nets $5m a day in trading profits is complete bullshit and only highlights a captured regulator/regulatory system.
The problem is that these firms are not making profit on the economic growth of various corporations and their investments in these credit & equity positions but rather acting like piranhas in skimming illegal profits from pension funds and individual retail investors - and then sharing the pirated profits with politicians in funding their campaigns with ill gotten gains.
If you want a new law lets start regulating profit and risk transparency. Like Sarbanes Oxley, we should put jail time on the line for CEOs and CFOs signing statements. Ensure systematic transaction details are embedded for all activity so that they can be audited later by the regulatory agencies, but put the burden on self reporting.
Why??? The SEC doesn't have a clue how HFT pricing engines work, market implications in up and down markets, and cash flows from and to different participants (can't measure and monitor systematic risk). Make self reported (auditible due to transaction details) transparency regulatory rules with large penalties and corrective actions for non-compliance, automate audits through computer red flags, make findings and fines public knowledge. Punish the evil doers.
on Mon, 11/30/2009 - 12:41
#146323
You forgot the monopoly maintenance factor. They'll craft the transaction tax so that it's paid entirely by number 2 and lower on the speed totems.
on Sun, 12/06/2009 - 04:56
#154346
Any individual who traades a $100,000 poertolio aand trades a few times a day if going to pay over $200,000 in commissions.
IOW, 95% of traders here are O-U-T of the game. Obama said he wanted to take the speculation out of Wall Street (because he is a god) and it will be like a $50 tax on a pack of cigarettes.
Do the math on your commissions and you'll see that you will not be able to trade. It will be cost prohibitive.
Solzhenitsyn warned of people like this.
on Sun, 12/06/2009 - 04:56
#154347
Any individual who trades a $100,000 portfolio and trades a few times a day if going to pay over $200,000 in commissions.
IOW, 95% of traders here are O-U-T of the game. Obama said he wanted to take the speculation out of Wall Street (because he is a god) and it will be like a $50 tax on a pack of cigarettes.
Do the math on your commissions and you'll see that you will not be able to trade. It will be cost prohibitive.
Solzhenitsyn warned of people like this.
on Mon, 12/07/2009 - 12:30
#155409
"the bid/ask spreads will widen"
...... so you will change the way you invest if it isn't cost effective for you ........
on Sat, 11/28/2009 - 19:33
#145063
I think the do more harm than good formulation is misleading.
on Sat, 11/28/2009 - 19:41
#145069
A tiny tax, sufficient to wipe out HFT laddering via volume rebates would be hilariously effective.Until GS had an exception passed!
It would not hurt small time types, it should be targeted to nuke the HFT abusers.
on Sat, 11/28/2009 - 19:49
#145080
And once you've gotten rid of the HFT traders, who do you think will be on the other side of your limit orders???
The HFT machines are the modern day market makers, and markets without market makes do not function (outside of a select few super liquid names where there are natural buyers and sellers in sufficient quantity).
And, if you don't like the ~1 penny per share that you are paying to the computers, then you never traded against human market makers (making their markets in 1/8ths - that is 12.5 cents for the fraction impaired).
on Sat, 11/28/2009 - 20:10
#145088
Hi Peterpeter,
We exchanged posts a while back. I regret not answering your last post, but I appreciated the reply. You made some valid points. Glad to see you to let you know.
HFT issues are the only thing I have seen you post on (I don't read everything, this is just what I noticed). I can see the issue is important to you. You are close to it and feel like others operate on myths about it.
Do you think there could be a way for the transactions to be more transparent, to somehow post more information about what is happening during a series of trades? I think how closed it all seems is a big part of why I don't trust it.
on Sat, 11/28/2009 - 20:42
#145117
It's not easy.
I spend 12+ hours per day working on software to make trades and when I want to look at log files for a trade and determine why my software attempted to make a particular trade and follow the transaction to its completion (cancelled, replaced, filled or partially filled), it usually takes me several minutes of working through log files with literally dozens of lines of output over several milliseconds (thousanths of a second).
Each strategy is different in nature, and noone wants to reveal the inner workings of their own strategy.
The folks who seem the most worked up about HFT believe that all HFT is predatory in nature, where some signal is received in advance of all other market participants and that trading is based off of that information. There are certainly instances of that (mutual funds moving large blocks of shares in a naive way do open themselves up to being gamed because of the way they leak information about their future orders) - but mostly, that is not what is happening day in and day out.
Most HFT strategies are seeking to make a profit by either working both sides of a trade (i.e. seeing a market where the best bid is $9.90 and the best ask is $10.10, and placing a bid at say $9.91 and an ask at $10.09) to make a spread, or are calculating what they believe the market will value an asset at in some short time interval in the future (based on anything from momentum to the depth and size of orders on both the bid and ask sides, to fundamentals like exchange rates, interest rates and the movement of other related asset prices).
There really is nothing new under the sun with respect to HFT, other than the speed at which the math and the trade execution can occur.
Most of the HFT programs simply displaced humans who were attempting to profit off of the same strategies and information, however because the computers can do so many more calculations, they are able to cover a wider spectrum of assets than humans ever were (and with much greater precision) - which in turn leads to a great deal of competition. This in turn favors retail.
Example... My software has a position XYX that I paid 100.00 for. I am now looking to sell out of that position. Of course, I am looking to sell it at a price as high as anyone will pay for it, so I check to see what the best ask for XYZ is and see that it is 100.10. I place a limit order to sell XYZ at 100.09, so that my order will get filled ahead of the 100.10 order that was placed before me.
Now... because there is such intense competition, what frequently happens is that as soon as my order is placed at 100.09, it gets sent out as a quote to all market participants, and a few milliseconds later, there is a good chance that the order at 100.10 will get cancelled and replaced with an order to sell at 100.08 (jumping in front of me by a penny). This process continues where all of the various computers trying to sell the same asset will keep jumping in front of the other - until such time as they believe that there is no longer a profit to be made. That means that for the assets most frequently traded by the machines, the profit per trade converges on a value below 1 penny.
And all of this happens very very quickly. The net result of the competition is that instead of me having my limit order posted to sell XYZ at 100.09, it usually gets improved all the way down to 100.01 - or whatever value I stop making money at.
All however that the tinfoil hat wearing blog posters see is a machine that has sent out 5 limit orders and cancelled 4 of them in a time frame shorter than a blink of an eye - and thinks that something truly evil is going on.
on Sat, 11/28/2009 - 21:01
#145130
Thanks peterpeter. Your explanation is most helpful. I see this occuring everyday, intraday. Personally, I like tight spreads. If you know the game, you can game the game.
on Sat, 11/28/2009 - 22:47
#145180
We know how HFT or algo trading works or suppose to work. It's obvious you don't understand how the psychology of the market has changed as the computers have taken over. Removing the human emotion of fear and greed produces a market of no confidence. Who cares if you playing the spreads, the problem is when market psychology turns negative, your computers pull all their bids and stocks get destroyed. Yes you won't care but all those that hold 401(k)s can't handle the computer induced volatility.
Right now there's zero way to value anything in this market, everything's just a "bot" trade.
on Sun, 11/29/2009 - 11:45
#145366
Not only would common sense say otherwise (computers do not fear market turn downs, but instead analyze the opportunities to buy at what they calculate are prices below fair value), but the downturn in 2007/2008 proved this point.
In a market free-fall, with the exception of stocks that the SEC prevented from being sold short, there were no major air-pockets (stocks with no bids). The markets were incredibly orderly in their adjustment.
Contrast this to the 87 crash, or the crash of the 30s, and you should take away that the computers lack of fear and intense competition with each other provides for a more stable market during downward corrections.
> It's obvious you don't understand how the psychology of the market has changed as the computers have taken over.
I disagree - and suggest that you read Edward Chancelor's excellent book "Devil Take the Hindmost".
on Sun, 11/29/2009 - 12:20
#145397
My question to you is, how was the drop in Nov 2008, for example, proof that machines made the drop any better?
Sure there were bids, but the point people are trying to make here is that the bids were most probably from people! The machines simply got turned off because the HFTs programmers knew they would pick up massive amounts of anything below VWAP. Clearly, the VWAP on days like with the 777pt drop would be foolish for a human to buy, but algos would be all over that.
on Sun, 11/29/2009 - 12:58
#145420
Machines do not get scared. They are programmed to buy when they calculate there is good value and sell when things are over-priced.
This is quite a distinction from well established human behavior, in which fear of loss is a more powerful motivator than greed (there is ample research into this, much from the folks at U Chicago as well as some Israeli game theory folks).
There is no evidence I can point to on either side that says the machines were more of the buyers than the humans in 2008, save for my own software which was very active at that time (i.e. not turned off during one of the best trading opportunities of my lifetime).
on Sun, 11/29/2009 - 13:12
#145422
I am not much of an investor, so I maybe be completely off. But I have been wondering.
Why is it a good thing to artificially create demand for stocks? Why is it better to artificially shrink the bid-ask spread of stocks? If a stock has a large bid-ask spread, shouldn't investors simply take that into account? (Because the spread will be there when you sell, would it really matter whether it is 1 cent or 10 cents?)
Also, doesn't HFT cost investors more in the end because it distorts stock prices more than it narrows bid-ask spreads?
I appreciate any educated comment.
on Mon, 11/30/2009 - 10:14
#146190
Shrinking the bid-ask spread is not creating artificial demand, it is bringing natural buyers and sellers together.
Jack wants to buy Exxon at 10AM, Jill wants to sell Exxon at 10:30AM. Market makers ensure that Jack can buy shares at 10AM and that Jill can sell it at 10:30.
For the benefit to the market of bridging the temporal gap between the 2 natural sides to the order, they make a spread.
Over the long haul, the spread is a good bet - but on any individual trade, there is material risk, since the price can move after 1 leg of the transaction is complete.
on Sat, 11/28/2009 - 23:47
#145218
Yes, PeterPeter, thanks for the explanation. Now, I am much more fully convinced that HFT is completely useless and should be taxed out of existence. Why don't you go pitch pennies out back with some of the illegals to fulfill your compulsion to squeeze the cents out of life?
on Sun, 11/29/2009 - 00:17
#145228
ah, so you arent comfortable dealing with more perfect markets......the little imperfections are where you prefer to dabble
on Sun, 11/29/2009 - 11:57
#145377
Yes, I am pretty much out of the markets now that they have become detached from fundamentals. The run up seems a HFT induced bubble. I'm sure the HF traders will be out well ahead of the pension funds and 401K accounts when the SHTF. They are masters of the game of making themselves wealthy with no heed for the economic waste they leave behind.
on Sun, 11/29/2009 - 00:13
#145227
We're on to you Mr. Smith.
That is, all of us who have taken the red pill.
on Sun, 11/29/2009 - 01:00
#145243
There are lots of explanations why a tax won't help.Perhaps not...all I know is this:GS has a trading record which defies logical or mathematical explanation if full on cheating is ruled out.Let's call a spade a spade.GS operates a money siphon, they provide zero value to the non opaque functioning of the market while stealing with the best technology available.They need to be stopped.As the economy craters further I cannot help but wonder if the capital they are stealing might not be better used elsewhere in the system.And that is really the point isn't it?They are stealing via a totally opaque mechanism...I am calling BS right here.We need to stop the theft, now.And there has to be some vestige of accountability for the horrendous damage they have caused.
on Sun, 11/29/2009 - 01:10
#145248
Thank you for this explanation. The point about being the modern market makers is key.
Based on peterpeter's description it occurs to me that the whole source of profit in the HFT game comes down to information asymmetry. Right now the HFT specialists are the beneficaries. But, as creative distruction takes hold, the profits will become more evenly distributed and become dissipated. The idea that the current HFT outfits will be the sole posessor's of this knowledge from here on out is nonsense. Case in point, this guy is spending over 12 hours a day improving his mousetrap just to keep up with the relatively small number of participants who are already in the game. Other players will figure out how to work with HFT for their benefit. What is to keep HFT from moving into other markets? Think about those thinly traded futures. With HFT players in the game companies will have another tool to help them hedge a particualr risk.
It seems to me that having many market makers is much better than relying on the anointed few. With enough HFT players dualing over pennies we may well end up with with a market in which we have greater liquidity and confidence in than anything based on the current framework.
on Sun, 11/29/2009 - 11:30
#145352
"the whole source of profit in the HFT game comes down to information asymmetry."
and as pp says, this is a game as old as the stock market just now played with computers. the question is whether computers are, when taken as a whole, making info more symmetrical or worse than it was before they arrived. some could make a strong case that the existence of ZH alone suggests that it has. and the vig per trade has reduced so much that the big boys have to spend more and more capital to capture volume.
"Case in point, this guy is spending over 12 hours a day improving his mousetrap just to keep up with the relatively small number of participants who are already in the game."
excellent point, how about an open-source HFT algorithm then? have all the peterpeters & sergeys of the world anonymously collaborate to beat the boys at their own game right in front of their eyes? make them spend more and more capital to make less and less per trade. sort of what guerillas have done for centuries with foreign invaders, but legal & nonviolent...starve the beast while pricking them with a million needles.
it's time to take the turf away from the naughty boys yes, but a tax ain't gonna do it...been there, done that. we should all know by now that government is not our friend until they have no other choice...and we aren't quite there yet.
on Sun, 11/29/2009 - 12:28
#145403
> Case in point, this guy is spending over 12 hours a day improving his mousetrap just to keep up with the relatively small number of participants who are already in the game
There are hundreds (possibly thousands) already in this space - which is why the competition is so intense and the resulting spreads are so thin.
New entrants who can improve on existing strategies are constantly entering the market, and existing players are continually improving their strategies or going out of business.
> It seems to me that having many market makers is much better than relying on the anointed few.
There are no "anointed few" in HFT. There may be some companies that are larger than others in this space (GETCO, GS are already clearly on your radar), but there are constantly new entrants eating at their lunch.
I can't think of a single field where there is as much competition, and in which the barriers to entry outside of programming skill are so low. Reports of "super computers" and multi-million dollar expenses to co-locate are nonsense. A $10K Dell computer is sufficient to compete (if programmed well), and co-location space is cheaper than most companies pay in rent monthly.
In contrast - before the machines started making markets, we did rely on a select group of relatively few human market makers (running around in funny looking jackets), who were sued by the SEC in 1996 for collusion (something not possible with many machines competing with each other on a micro-second time scale).
The folks who rail against HFT seem to prefer paying larger spreads to humans that are more capable (not more desirous) to cheat than the machines. Makes no sense to me.
on Sun, 11/29/2009 - 13:19
#145425
Peterpeter,
Thanks for answering my question and staying with it. I think a lot of people have benefitted from the ensuing discussion. Regarding collusion, I am suspicious that the so called plunge protection team is a bunch of computers commiting incest with each other in order to drive up the markets and make the Dow look good so that we can project stability to the citizens of the US and the rest of the world. Because no one can get a looksie at the "property"/programs of others, how could we ever find out if such a thing was true or not? I am not smart enough to know if this is specifically a HFT issue (though I think it is because if I was right, it is the frequency of the trades that makes it possible to even out the dips) or not. And a hidden program (or 2 or 3 or 8 cooperating hidden programs) is that, hidden.
on Sun, 11/29/2009 - 23:10
#145843
exactly, the HFT activity can drive the market with massive activity, producing an artificial field. pumping the price of a low priced stock on low volume on no news, in a sector that is commonly understood to be heading towards reduced earnings, is not a value creating activity. lets call a spade a spade. how do we inhibit the blatant manipulation that turns the market into a surreal parody. GS doesn't need to be taxed, but they certainly should be fined.
on Sun, 11/29/2009 - 23:18
#145856
I think we agree, but that may not be enough.
1. I think they need to be broken up anyway because they are breaking anti-trust laws.
2. If the collusion I (and many others more convincingly than me) am suggesting is real, they need to be more than fined. The need to be treated like racketeers and the RICO act needs to be applied to their situation.
Because the situation is unique, I think there needs to be a hybrid of these two ideas to deal with the too big to fail. Fining them is not good enough. It is not a deterrent. They are Too Big To OBEY. They need to be split up until they are manageable by the regulatory agencies so that this kind of thing cannot happen again.
That is, of course, if the collusion aspect could be proved. If no one can get a look at the program, well now, whats a regulator to do?
on Mon, 11/30/2009 - 17:00
#146772
wheres elliot ness when you need him
on Mon, 11/30/2009 - 19:21
#146969
GS seems to be the one who is "untouchable" right now.
on Sun, 11/29/2009 - 13:50
#145435
peterpeter, you have brought me onto your page. Thanks for your reply to my obvervations above.
I had no idea the were that many players in the HFT game aleady, perhaps I should have said the "compartively few". Anyway, the whole notion of trying to count how many players there are is a slippery one. Do you count the number of alorithims or the instances of them?
on Sat, 11/28/2009 - 19:44
#145072
Considering, any transactions on 401k's should be exempt; I can't think of any others deserving exemption. Pension funds expenses are itemizable, are they not? Mutual funds as well;else, why would they churn their accounts constantly? I buy certain shares at predictable times, dollar cost averaging if you will...I don't spend my day buying and selling my stocks. I see your point about trading profits too...Good idea!
on Sat, 11/28/2009 - 19:46
#145074
A graduated tax on volume now...That has a huge upside to it IMO...
on Sat, 11/28/2009 - 19:48
#145075
100% tax on failure to deliver would be good too. If your not naked-shorting stock there should NEVER be a failure to deliver stock on a short position.
on Sat, 11/28/2009 - 19:57
#145083
Surely you jest. There are actually people who read (and understand?) ZeroHedge who believe that a tax (remember, a tax is an INVOLUNTARY taking of something by someone else from YOU, by force, upon pain of imprisonment or worse) is a good thing?
Can this really be true??
on Sat, 11/28/2009 - 20:42
#145116
RIght on. Seriously people, I am complately surprised by the support for this ludicrous tax. It will completely destroy thousands of work at home trader jobs and screw up liquidity. How can there be so much support here?
on Sat, 11/28/2009 - 21:41
#145150
Just want to be sure I understand your point. Prior to Marla's admonition to the contrary, it was common sport at ZH to propose assorted ways to have The Squid's head on a pole. Some of it quite graphic. So, it's ok to call for the Wall Street elite to be missing in action, but it's not ok to simply tax them. A plumber is taxed for his parts, his labor, his profit, and his estate -- why not a little bitty transaction tax on Wall Street's activities? Seems like a small price to pay.
on Sat, 11/28/2009 - 22:48
#145183
Tax, tax, tax, tax, Rocky..............FOR WHAT????? If the government weren't so corrupt/inept at what they [try to] do, we all might be more sanguine about paying taxes. As it is, the situation is so bad the right answer these days is ALWAYS................NO TAXES!!!!!
on Sun, 11/29/2009 - 13:37
#145432
Oh, I don't know. Call it retribution. Revenge.
What else can one do when faced with an untenable situation.
Go the the mattresses and shoot at anything that moves.
When all seems lost irrationality prevails.
The most egregious perpetrators will escape the tax anyhow.
on Sat, 11/28/2009 - 23:34
#145212
the people who voted for marla just want in her pants
on Sun, 11/29/2009 - 23:14
#145852
if you'll vote for something, you don't believe in, just to get a perk, you're no better than a career politician (sorry marla, probably a sweet perk)
on Sat, 11/28/2009 - 19:59
#145084
The securities transfer tax has to be directed at the most parisitcal elements of finance capital. The 1% tax (in the case of the USA) needs to be split evenly .5 for the feds and .5 for the 50 states, apportioned by representation. NO money is to go to any international bank of the world or anything like it.
The primary goal is to extinguish derivatives, and fund the social safety net. The nationalization of the fed by itself kills the personal income tax so this has nothing to do with that. The personal income tax only goes to pay interest to offshore foreign banks, and has no purpose within the republic.
It is very important to destroy programmed trading, high frequency and flash trading and whatever other names it hides under. If you want market liquididty, stop extracting wealth from the nation to cover the deflating negative value rasbucknik derivatives. Giving the WHOPPER at 85 Broad St the power to manip-ulate the market does not help anyone, anywhere except 85 Broad St.
on Sat, 11/28/2009 - 20:05
#145086
The is absolutely no reasonable justification for a tax. I also think they should remove the tolls from the bridges and tunnels entering and leaving Manhattan. How is that fair?
on Sat, 11/28/2009 - 20:08
#145087
More behavioral engineering through taxation, terrific. If the constitution weren't a dead letter, there would be zero need for this debate.
on Sat, 11/28/2009 - 20:12
#145091
+10
on Sun, 11/29/2009 - 01:25
#145252
I couldn't be more concise and precise.
on Mon, 11/30/2009 - 11:25
#146267
Any level of taxation, even no taxation, is a choice to engage in behavioral engineering. It's just a question of who the intended beneficiary is. Color me surprised to see so much support for the non-productive predator class among the Randites here.
on Sat, 11/28/2009 - 20:11
#145089
I'm tired of taxes being used to some folks behaving the way other folks think they should. If the activity is bad or harmful, just make it a no-no. If it isn't illegal, then stop trying to tax the behavior you want.
HFT bad? Then HFT is banned and not allowed in our markets, not just made expensive. Taxing it to stop it is underhanded and, uh, greasy. That's *their* game, not mine.
on Sat, 11/28/2009 - 20:13
#145092
I know that many of you will hate me for this, but it is good to have an antagonist.
Transactions should be taxed. The reasons are very simple:
1. There is no societal gain from trading. Nothing is produced, nothing is changed, and nothing is improved. Yet even with all of that nothing, money still leaves the system. Money that would either be used to pay wages or lower prices is instead removed from the system. To make a point, I will put it in this crass form: "You pay me so that you can work."
2. Trading isn't investment, it is gambling. All that is happening on an exchange is debt is being bought or sold. Stocks/bonds are all the same, debt, the difference is only the name. Before all of you fly off the handle, consider this: when a company needs more money, they issue stock. That is to say, they get a loan. This point shows the true essence of an exchange, which could be stated as "the provision of a venue and rule set for the gambling of the future value of debt/worth of a specific type of item", where worth is only valid for direct commodity exchanges.
3. Any money that is in the stock market is not money that is required to live. By this I mean that you aren't paying your mortgage with it, you aren't buying gas with it, and you aren't paying for food with it. This puts it in the same category as savings accounts and CD's. We tax interest, we tax capital gains, we should tax transactions.
The only reasons to not have a tax on transactions is the support of the status quo, and in particular, big business finance companies. I would gladly live without either.
Give me one second to get my asbestos long underwear on.....OK, flame on.
on Sat, 11/28/2009 - 20:27
#145105
Well said Defender...Might I add, corporations do not profit from trading in their stocks once they are initially sold.
on Sat, 11/28/2009 - 20:48
#145123
1. Wrong. Society gains greatly from trading. You buy goods originally from China, from men with expertise in logistics. They perform a distance arbitrage, and you benefit. Traders on Wall Street are no different, they arbitrate prices... If they realize that the market is overvaluing one firm, due to their analysis, they buy it, and bring the price to a more rational level. If you own stock in that firm, they have helped you. If you are looking to buy a stock, you're more likely to get a reasonable price, due to traders.
2. For some it's gambling, for some it's not. Warren Buffett gambles too. He gambled that the system would support his "buy and hold" philosophy. Guess what? It didn't. What did he do? He ran to his buddies in Washington with his pants wet, and his hand out... My point is, you shouldn't make the mistake of trying to use legislation to encourage one type of behavior or another... let people, and companies make their own mistakes, and the market will reveal the truth.
3. This is just patently wrong... Many people hold savings in stocks. Also, arguing that since we do xyz, we should do abc... is flawed arguing - the government does a LOT of dumb things.
on Sat, 11/28/2009 - 21:16
#145137
`If they realize that the market is overvaluing one firm, due to their analysis, they buy it, and bring the price to a more rational level. '
Borrowing free money to inflate the market ? What's the rational p/e of the markets today ?
I could make millions gambling in Vegas too. All I need is limitless free money and a backstop from the Treasury and FED.
on Sat, 11/28/2009 - 23:12
#145200
OK, and I agree with you 100% about the FED. It should be abolished. But that is a separate issue. In this thread we're debating the tax.
on Sat, 11/28/2009 - 21:54
#145159
Sorry Stevm30, but I think that you missed what I was going for.
1. The points you make all hinge upon buying and selling of stocks being a good thing for society. My point here is that society doesn't benefit from having companies that have high or low "value", society only gets benefit when there is a beneficial service rendered or a good produce. Unfortunately juggling money from one bank account to another does neither of those things. In fact, this system is detrimental to society. Uncle Bob gets his job cut washing widgets on line 3 so that the share holder (you) can have a "beat", thus the whiz-bang produced now has a 30% shorter lifespan. Your ability to stack that five dollar bill on top of the thousands of others that you have doesn't benefit society, while Uncle Bob losing his job and whiz-bangs that break hurt society. (And no, I am not a socialist)
2. & 3. These are both arguments from the same vein. I completely agree with you that government needs to butt out and let us live our life. Unfortunately we the people got lazy, and let our government be run by a bunch of corrupt and crony shysters that promptly sold us into slavery. Now we have to pay for the mess that we allowed to happen. This means new taxes, and higher taxes, and no more bailouts. I can't see a better way to go about it than to tax that which can only be called a luxury.
on Sat, 11/28/2009 - 22:55
#145185
the government sold us into slavery........nonsense hyperbole...........you really don't know anything about government or slavery or taxes or anything, do you?
on Sun, 11/29/2009 - 01:37
#145257
I pay almost 1/4 of my paycheck in payroll taxes and insurance, and I don't make all that much. Then there is sales tax, and a tax to drive my car, and other ones that I am not thinking of right now. I am sure that these will all increase soon, as the carrying cost for the national debt is about $1300 per man, woman, and child. How much of my life must be taken from me before I am considered a slave?
on Sat, 11/28/2009 - 23:10
#145199
Defender, your arguments don't convince. Certainly society benefits when the market is accurately pricing shares of its companies. Here is an examples of why:
Let's say I do my homework (check my facts etc...) on my investments, and another person doesn't. We both invest in year 1... after several years, assuming that the pricing system works properly, I will have gained more than the other person... with my profits, I can buy a larger house, have more children, buy a new car. The other person, who gained less, or loss money, can't. The "values" of the marketplace have rewarded virtue, and a respect for truth, and those values will be seen and adopted by others.
The error in your point of view stems from a prejudice toward the visible (Bob), and tangible, and a prejudice against the indirect, but just as real, positive consequences of orderly pricing of assets.
Also, I chuckled when I read that the new "whiz-bangs" now have a 30% shorter lifespan - what made Bob so great at washing them??? - if that's so, why do you still buy them? If you don't care, what difference does it make anyway? Also, why should Uncle Bob get preferential treatment (as compared to someone in China)... you might not be a socialist but that sounds pretty nepotistic to me.
Finally, if the people got lazy, the solution is not to do the next lazy thing, which is to pass a law, and create a tax... it's to find the root of the problem and fix it.
on Sun, 11/29/2009 - 01:27
#145253
Thank you for responding Stevm30, I see that we have been arguing the opposite ends of entirely different sticks.
My point is that the stock market itself is a drain on society. What started as a useful function of moving cash to people that needed to produce things has since denigrated to little more than a slot machine that people go to everyday to pull the lever just one more time. Each one of them hoping to get 3 lemons so that their CDS will pay out. What does daily gain have to do with investing? How has your purchase of 500 shares of CIT furthered this society? My hope is that a sizable transaction tax will revert the market to what it is supposed to be, and maybe remove the grift that has seeped into it.
As far as Bob goes, my example was supposed to mean that they no longer washed the parts at all, and thus the bad lifespan on the whiz-bangs. Why would I still buy the whiz-bangs? Well, maybe a whiz-bang is a car engine, and when i have to buy my car second hand, I find out that I have to replace the engine at 110K miles. But since this is the only car I can afford, what choice do I have. And while we are on the topic, the reason that I have a decided disdain for the intangible is that I have never had my life improved by one. The privilege of paying $20 for a $0.05 DVD, $50 for getting the engine codes read on my car, and $100 for that pill has left me a little jaded. Why should I pay those exorbitant prices? Well, that fat cat company has to meet its target earnings, so that your pants can jingle when you walk.
For your final point, I would like to remind you that we are already in the middle of the problem, and it is never lazy for a working man to say that he doesn't pay enough taxes. It is my life and my blood that I pay taxes with. What I am saying is that this nation requires a massive helping of austerity, just to get our head back to the surface. With the leaden weight of $12 trillion dollars around our ankles, we will be lucky to get out alive.
on Sat, 11/28/2009 - 21:19
#145139
You make excellent points, thanks.
A few observations to add to the debate:
1. debate the merits of the concepts first, asssuming perfect implementation;
2. only then consider the feasibility of implementation (including the problems of loopholes and spread consolidation). Please people, don't run them together, then we get nowhere.
About the TTAX:
1. It provides a means to reduce unproductive churning;
2. It would encourage fewer transactions, better due diligence, and better decisions;
3. It provides monetary authorities (hopefully the Fed is transparent by then) with the ability to affect the velocity of money as well as its costs;
4. It could be used to replace income taxes and free up a huge amount of time and resources unproductively spent by millions of citizens when preparing tax returns;
5. It could place effective limits on government spending if that is all the government gets - higher TTAX reduces economic activity and lower TTAX permits increased activities but only so much is available (can't kill the goose that lays the golden eggs);
6. It is a progressive tax since those with more money are likely to execute more transactions;
7. It may be an effective way to tax the black economy and ensure everyone contributes to the common weal; since cash may be outside of this loop, I suggest taxing cash at a 100x higher rate.
8. Make the TTAX low enough to prevent serious discontent with the average user and high enough to have a meaningful effect, for example, tax at a mill rate: one thousandth of the transaction is taken as tax;
9. It may stabilize exchange rate fluctuations as well as interest rate fluctuations; and (I'll stop now...)
10 It may reduce price fluctuations.
Undecadent
on Sat, 11/28/2009 - 22:51
#145184
You are correct. We hate your arguments.
on Sun, 11/29/2009 - 13:55
#145438
"1. There is no societal gain from trading. Nothing is produced, nothing is changed, and nothing is improved"
So, your claim is there should only be buy-and-hold participants/investors (and basically get rid of market participants that establish prices and facilitate transactions/liquidity through competition)? So, when one investor wants to buy from another, what price do they transact at? It ends up being like the housing market, where there is no liquid market for a particular house, and this takes effort and research for all market participants to find an even half-way reasonable price.
Also, what if when an investor that wants to buy, there are none or very few who want to sell at that time? Having traders who trade in and out of positions constantly helps bridge the gap between investors who want to buy and sell with eachother. Two investors can still transact with each other in the current marketplace, but the fact that they don't very often means they can do it at a given time and price easier with the existence of traders.
"2. Trading isn't investment, it is gambling."
I think this is oversimplified, but even assuming this statement is correct, this doesn't show that it should be taxed... Each gambling transaction isn't taxed, only the profits from it - just like the profits from trading.
"3. Any money that is in the stock market is not money that is required to live... This puts it in the same category as savings accounts and CD's. We tax interest, we tax capital gains, we should tax transactions."
This is a terrible analogy. Taxing trading transactions is more similar to taxing money that goes in and out of savings accounts. Taxing interest from savings accounts is more similar to taxing profits from trading - which they are.
on Sun, 11/29/2009 - 15:51
#145513
1. Yes, I am advocating a "buy and hold" approach. I expect this to make the stock market very similar to houses, where someone has to research the company and actually find the value for a stock. Or conversely the stock could be bought by the company and then re-issued so that an efficient market is formed.
Also, contrary to popular belief, a scarcity of stocks/bonds is a good thing, as it ensures the availability of capital when it is needed. The fact that we now have to play hot potato with a stock before it finds a home only demonstrates the lack of actual investor interest.
2. & 3. I agree that three was a terrible analogy, but these points were based upon the fact that the government has increased the debt, and therefore carrying cost, by several percent of our national budget. This money must come from somewhere, which means new, or higher taxes. I am putting this particular part of society forward as a viable option because it can only be defined as a luxury. No one NEEDS access to the stock market, and retirement funds are mostly buy and hold already. Since a sales style tax would fix many of the woes that ail the stock market, it was the format that I put forward for consideration.
Please comment on this last point, I would very much like to know where others would like to get our extra funding from.
on Sun, 11/29/2009 - 14:21
#145458
trading profits are already taxed via capital gains
on Sat, 11/28/2009 - 20:13
#145093
Did half o bamys cabinet pay their fair share? well guess wholl be a payin this tax?
on Sat, 11/28/2009 - 20:15
#145094
It sounds to me like an anti-capitolist, marxist populist has proposed a "sin" tax to discourage market trades, or at least "spread the wealth" around. He hopes to get the disenfranchised on board by promising that this'll hurt da man.
No thanks. If GS et al is able to game the system unfairly by comprising 50% of the trading volume, then they are in spirit a monopoly and different laws apply. Apply them.
on Sat, 11/28/2009 - 20:28
#145107
You mean the Anti-trust act? Or RICO Act?
The real issue for me is things are like they are. If they can't change then taxing them is a short term fix (which will be an intervention which will inevitably lead to other crises which must be responded to).
If things were as they should be, the idea of this tax is absurd. That is how I voted, if things were as they should be. But they are not, so the short term fix looks tempting.
on Sat, 11/28/2009 - 20:46
#145122
Ahhh...RICO with a mess of unindicted co-conspirators...I can only dream for the day.
on Sat, 11/28/2009 - 21:04
#145132
I doubt any tax would be short term. A tax on all trades because GS has a super computer and we don't.
on Sat, 11/28/2009 - 20:20
#145099
It will hurt the retail but not the HFT because they will get a waiver since they provide "Liquidity"
on Sat, 11/28/2009 - 20:23
#145102
I vote no on the tax, on principal and for the obvious reasons stated above. Like the guy from Providian says in the Card Game on PBS, and I paraphrase: We, the banks, don't care what rules are implemented; just tell us what they are so we can come up with ways to get around them.
What I'd do if I was in charge.
Step #1: End the Fed and end personal income tax. That would end the Recession/Depression overnight as consumers would have about double the money to consume.
Step #2: Set up the Bank of the US and 49 'Bank of (insert State)' - ND already exists.
Step #3: End market manipulation by aggressively monitoring and policing all markets to ensure no frontrunning, HFT or flash trading occurs. End all volume rebates. Make all market order information transparent and available to all. Easier said than done, I know, but doable. Make it all open source.
Step #4: Start producing goods again.
And some other stuff. But since I'm not in charge and none of the above will ever happen I'm off to my offgrid retreat.
on Sun, 11/29/2009 - 01:39
#145259
No subsidized, supported, 'state', 'national' banks, ever, for any reason. Free market decides interest rates - sharpen your pencils or die.
No monitoring. No protection. No regulating. No whining. No babies. If you defraud/deceive you are brought to trial by a jury of fully-informed peers http://fija.org/about/
Get sharp people on your team and invest at your own risk.
#1 and # 4 = awesome! But like you I have a plan X.
on Sat, 11/28/2009 - 20:24
#145103
This tax is a terrible idea. It will do nothing to discourage the high-frequency traders and won't really punish Goldman Sachs.
There are far better ways to accomplish what this bill is trying to do.
on Sat, 11/28/2009 - 20:27
#145106
A national sales tax 6.5% that should slow down the trades and make everyone think twice before they launch into ownership of a company.
on Sat, 11/28/2009 - 20:32
#145108
http://www.bloomberg.com/apps/news?pid=20601087&sid=abNkskpey.4I&refer=home
March 4 (Bloomberg) -- The proposed tax increase on stocks and derivatives trading that is intended to help pay for the Wall Street bailout would hurt investors, NYSE Euronext Chief Executive Officer Duncan Niederauer said. “It would decimate liquidity in the market in an unprecedented way,” he said late yesterday at the Museum of American Finance in New York. “That would be about the worst thing that could happen, but I don’t believe it will get any traction.”
on Sat, 11/28/2009 - 20:52
#145126
`The proposed tax increase on stocks and derivatives trading that is intended to help pay for the Wall Street bailout would hurt investors, NYSE Euronext Chief Executive Officer Duncan Niederauer said.'
They need a new excuse? How did those GM and Chrysler investors end up?
on Sat, 11/28/2009 - 20:34
#145109
I think transaction tax is the need of the hour for US debt. How else would USA pay interest from 2011?
As for the application of the rule to GS etc.. this country as become so third world that no rules apply to Richie rich.
on Sat, 11/28/2009 - 20:38
#145113
My vote is for a $0.01 or $0.05 or $0.25 tax on each transaction, NOT a % based transaction. Percentage base would hurt the small trader and either approach would terminate the HFT.
on Sat, 11/28/2009 - 21:42
#145152
Small trader, by definition, does small trades. Wouldn't a % based system be beneficial to the small fry?
on Sun, 11/29/2009 - 02:54
#145274
I think any percentage that is worth applying would be significantly larger than a small nominal fee.
on Sat, 11/28/2009 - 20:46
#145119
Right now I say no no no. Not until the boneheads in Washington learn to stop spending. No more bailouts.
on Sat, 11/28/2009 - 21:26
#145120
A gross receipts tax on anything is not optimal. We should tax consumption not investments. A security transaction tax cascades and in many cases will tax the same transaction multiple times. Anything close to .25 percent is a volume, and liquidity killer. Look out below. Spreads will widen.
The section 31 fees used to fund the SEC is a form of a securities transfer tax: however the rate is around $22 per million--a far cry from what DeFazio and the House Dems are proposing.
Very dangerous in the current uncertain environment.
on Sat, 11/28/2009 - 20:52
#145124
17 “Yet your people say, ‘The way of the Lord is not just,’ when it is their own way that is not just. 18 When the righteous turns from his righteousness and does injustice, he shall die for it. 19 And when the wicked turns from his wickedness and does what is just and right, he shall live by this. 20 Yet you say, ‘The way of the Lord is not just.’ O house of Israel, I will judge each of you according to his ways.” just a little food for thought. don't forget this... 10 “And you, son of man, say to the house of Israel, Thus have you said: ‘Surely our transgressions and our sins are upon us, and we rot away because of them. How then can we live?’ 11 Say to them, As I live, declares the Lord God, I have no pleasure in the death of the wicked, but that the wicked turn from his way and live; turn back, turn back from your evil ways, for why will you die, O house of Israel?
on Sat, 11/28/2009 - 21:33
#145148
Arnoldsimage,
You are a trip when you do the biblical thing while using that image. I picture her saying it to us, in this forum, and giggle. I bet she could save some souls. Fascinating juxtapositioning.
on Sun, 11/29/2009 - 02:02
#145266
but the words are the lords' and it's not about my avatar. it's about you and god.
on Sun, 11/29/2009 - 12:03
#145379
Oh I love Bible study. This is for Jamie and Warren, bankstas that charge way too much interest on credit cards:
If you lend money to any of my people that is poor by thee, thou shalt not be to him as an usurer, neither shalt thou lay upon him usury.
Exodus 22:25
on Sat, 11/28/2009 - 20:57
#145128
HFT is queue jumping- it should be illegal, plain and simple. Tax all stock and debt transactions by the GS/JPM cartel. And eliminate all derivatives- what the hell do they do for the economy and the country ? Nothing. It is just another way to skim. It makes Tony Soprano look like a choir boy.
Weren't we told that all of this was a "zero sum" game ? Oh yeah, when one of the counterparties can't pay their bet in the "zero sum" game the taxpayer gets wiped out, but everyone else at the crooked casino is made whole by their inside men at the Fed and the Treasury.
So call their fricking bluff; if these crooked parasites don't like it, then let them move to Dubai- there is some cheap real estate coming up and I hear the neighbors are friendly.
P.S. JamesBrrando- your girlfriend says, if the truth be told, you could qualify for a refund of the penis tax....
on Sat, 11/28/2009 - 21:02
#145131
Tyler speaks (for a really, really long time....pick it up at around the 18min mark)
http://www.thedisciplinedinvestor.com/blog/2009/11/22/tdi-podcast-136-zero-hedge-2010-an-economic-odyssey/#idc-container
on Sat, 11/28/2009 - 21:09
#145134
The "wash sale" rule doesn't stop operators from walking a stock price higher. Does anyone think a transaction tax will stop that anymore than the wash sale rule? I'm with Marla...
on Sat, 11/28/2009 - 21:19
#145140
A transaction tax at a high rate--like .25%, will kill off HFT, a lot of stat arb players, long/ short preferred stock funds, quant rebalance programs--a lot of other plays. If we say Great, let them die, then please know the unintended consequences of this decision. The arbitrary ban on shorting bank and financial stocks late last year by the SEC (per Paulson per John Mack): a complete disaster--for investors and the banks.
on Sat, 11/28/2009 - 21:21
#145142
A very small transaction tax sufficient to deter HFT churning, along with a 1 second minimum before a bid or offer can be withdrawn would do a lot to help the market return to health. There must be no exceptions, discounts or government paid offsets, even for true market makers, and no trading "liquidity" incentive from any exchange that would more than offset. Lastly, Congress should make it clear that it is illegal for the Fed, Treasury and government insured financial institutions to own stocks. It should allso be illegal for stocks to be bought by any institution with money borrowed from the Fed or government (taxpayers). Along with actual enforcement of existing regulations by the SEC, the stock markets should then return to normal.
I can only support such a tax if it has ZERO exceptions, discounts or government paid offsets.
Call me a dreamer...
on Mon, 12/07/2009 - 07:59
#155112
The few exemptions that Tyler presents in the nay case are acceptable and probably even beneficial. My vote is now a stronger nay.
on Sat, 11/28/2009 - 21:21
#145143
Transaction tax is the Stamp Act II.
on Sat, 11/28/2009 - 21:21
#145144
Did I say tax? I meant axe. We should axe off the heads of all investment bank maggots.
on Sat, 11/28/2009 - 21:53
#145158
Marla will get ya for that!
The Fifth Rule Of Zero Hedge Is...
on Sun, 11/29/2009 - 00:52
#145239
Take the Fifth, Buzz.
on Sun, 11/29/2009 - 09:41
#145322
Do it legally. Pass a law first, the maggot decrapitation and relocation act.
on Sat, 11/28/2009 - 21:31
#145147
Unless a case can be made for what HFT actually produces, of any tangible value, it is NO LESS WORTHY of being taxed than, say taxing the shit out of a small business owner, who takes risks, produces jobs, and actually CREATES stuff. The fairest tax of all is the Estate Tax. The people who win the genetic lottery didn't earn it, and at the very minimum ought to be taxed as ordinary income on every dime. Stop taxing productivity and tax it when the producer dies, as it's being distributed to the Paris Hilton's of the world....
on Sun, 11/29/2009 - 06:20
#145288
A liquid market is certainly not a "tangible"but all will agree it is very, very valuable.
Tangible does not = valuable. Tangible means it can be counted. Tons of tangible, but useless, crap gets produced every day.
on Sun, 11/29/2009 - 19:13
#145657
How liquid were markets before computerized HFT trading? The "value" of HFT is a Red Herring thrown out by only those who profit from it. Having an auction with an audience of auctioneers who plan to have an auction to other auctioneers provudes lots of liquidity, but true price discovery gets more jaded towards what the auctioneer will pay, vs what the actiual worth is to the end market. The liquidity argument is bullshit, plain and simple...
on Sat, 11/28/2009 - 21:46
#145154
History tells us that when the total tax rate on people exceeds 60% a revolution follows!
on Sat, 11/28/2009 - 21:46
#145155
the transaction tax is idiotic. counter-productive. everyone knows it except some congress criters who don't care. we need to find ways to lower taxes, such as the cap gains tax and the ss tax.
while we may debate this issue and the ramifications of dubai defaulting, the biggest story of the week doesn't even get an honorable mention on this site.
i'm talking about barbie and ken who strut in to the west wing and chill with the prez and vice prez while thousands of holiday travelers take off their shoes and go through x ray machines at the local airport. what is the significance? the emperor has no clothes. the emperor is INCOMPETENT. think about the ramifications of that.
on Sat, 11/28/2009 - 22:04
#145164
There wasn't much said about "balloon boy" here either. The financial angle just wasn't there. Your hot topic doesn't carry much weight here. Nor would the topic of this post be a popular hit at the USA Today site. It would leave the lumpenproletariat scratching their empty little heads.
on Sat, 11/28/2009 - 21:55
#145161
I have to say, almost everything I read on Zero Hedge seems well-informed and based on solid logic. Everything except this topic. When it comes to a transaction tax I hear things that make me cringe and never want to come back to this place. The lack of understanding of markets is just appalling, especially what seems to be a total inability to grasp one critical concept for healthy markets: liquidity. Now, as I explain, let me say I hate the Vampire Squid as much as anyone, and think they should be abolished immediately. This point/argument is not about what they 'contribute' to this process.
Markets need liquidity, they need ‘depth of market’. Without this, anyone who needs to sell anything of any size will drop the market a large amount, and get a very poor price for what they sell. The current prices will not be very representative of what can actually be obtained, even for small sizes. Now imagine if there is any quantity of selling by multiple parties. It could move the market enough to induce mass panic. We need no more evidence of this than looking at what happens when one trades an illiquid stock with a wide spread, or when any vampire-like entity starts moving an illiquid stock. You see huge, out of proportion moves. This is not good for investors. Nor is paying up on a very wide spread, even if one is holding. No matter how long one holds, paying too much to get in and out is still a screw job.
Traders and speculators have their place, their role, and a big part of this is in being there to take the other side of the trade, for mutual funds, for hedgers, and so on. Most don’t make money, since as we all know, most traders are not successful. In fact, an argument could be made that small traders who provide a lot of this liquidity are net market neutral, in that the few who do make money are fully ‘subsidized’ by the loses of the perhaps 90%-95% that lose money. So, net overall they cost the market nothing and collectively provide a lot of liquidity. This is an entirely different group of people than Vampire Squid HFT maniacs who bleed the market dry and screw everyone. Yet they are grouped together like they are one and the same, and one approach is being crafted to stop them both.
Look, it’s all great fun to poke fun at the knuckleheads at the local coffee shop trading on their laptops, running the junk stocks up and such, but I have been at this a long, long time, and I’ve yet to see a single one of those kind of traders stay net profitable over time. So, if they are not net profitable, what is the reason to stop them from hurting investors. They are actually paying in to the system, not taking out. And what investors that we so want to protect are involved in those stocks anyway? None that I know of. But we are getting away from the key point.
Just like any ecosystem needs predators, we need liquidity providers. We need small speculators and small traders to provide depth of market. Without them, spreads will get incredibly wide, and depth of market will be very shallow. Yet human nature is to wipe out all the predators, and let the deer multiply until the entire system is out of balance. Even this analogy is not well-chosen, because even if anyone got the point, they’d still then equate these small liquidity providers with some kind of ‘predator’, and that couldn’t be further from the truth.
And as far as this tax not hurting investors, again, I see just a horrific lack of understanding of markets when I hear this. And from Zero Hedge people. I don’t get it. Imagine if all investors just bought and held. Markets would only go up. Great, right? Until a market or an issue got to 10X ‘fair value’, 100X fair value, 1000x fair value. There are no short traders to keep the value in line, as traders don’t exist. Sure, some will sell when they have a lot of profit, but most just hold, and the price rises endlessly.
Without a two-sided market, without speculative short traders (I don’t mean scumbag, illegal naked short sellers with huge leverage, I mean law-abiding small short side speculators and liquidity providers), there is no balance, like an ecosystem with all deer and no predators. You don’t see how unhealthy that is for a retirement account in the long run? Investors should be buying into stocks at 1000X fair value? Imagine if any event happened and most wanted to sell at about the same time, and no traders, and no buyers.
But also, mutual funds, although I agree they shouldn’t be ‘trading’ a lot, do buy and sell and rebalance frequently, and they should. With this tax, that will not be possible. Any rebalancing would have to be passed on to the holders, the people trying to ‘buy and hold’. There just isn’t a lot of thinking going on here about this. Just a measly 1,000 shares of a stock like AAPL and we are talking about $2,000 round trip in taxes, whether you made money or not (0.50% (this is the high end I have seen proposed) times two times the cost of the stock).
Every investor that wants to ‘rebalance’ his stock allocations, even every quarter, is going to get hammered. Out of one stock and into another, once each quarter (just an average, not all sell everything every quarter, this is just an example) drops 4% return per year just on that small rebalancing. If they are getting an average of 8% per year, a full 50% of their return goes to taxes for very simple rebalancing. That doesn’t hurt investors? Not to mention the much wider spreads they will pay, and the huge drops in price without liquidity.
What needs to be done is stop HFT and the Vampire Squid, but leave small traders who make a contribution to liquidity and provide a huge service to the greater good and the economy alone. Likely they are ‘self-subsidized’ anyway, and surely take little or nothing. And even if they did take, they are providing a service for what they do, just as a doctor doesn’t ‘take’ from society because he gets paid. But I can guarantee you what is going to happen. All this discussion is moot. They will pass this, supported by Zero Hedge, and exempt the Squid and others, and all the small traders will go out of business, along with all the quote vendors, trading software, tax preparers, valid educational firms, and all the other support players, which likely number in the hundreds of thousands in total.
Can one really say someone working at a quote firm programming or bookkeeping, or as a secretary at an educational firm doesn’t contribute to society, but someone who does a similar function for a strip club does? Or for a coffee shop? Or for a shop in a mall selling trinkets that none of us need? Look, small traders didn’t cause any of this, we all know it was insanely low rates, unregulated derivatives, crazy levels of liquidity, unregulated derivatives, no rules ever for the Squid and kind, unregulated derivatives, and, oh, did I mention, unregulated derivatives.
And, once again, let’s blame small traders who are providing a service while the Squid takes 100 million a day out of our asses, and let’s pass a tax that puts the little guys out of business, along with all their support businesses, and leave the Squid exactly as they are. Good solution. C’mon Zero Hedgers, use those brains you seem to display so well in other topics and think this one out.
on Sun, 11/29/2009 - 02:16
#145268
Dammit. My bookmark fell out again.
on Sun, 11/29/2009 - 06:08
#145286
Market liquidity. Bingo.
A transaction tax will kill it.
on Sun, 11/29/2009 - 12:02
#145380
Great post, nothing else needs to be added.
on Sun, 11/29/2009 - 12:05
#145384
ZHers are better at summarizing. This is like giving in to coloring with the grand-kids when you've had 6 glasses of scotch.
on Sun, 11/29/2009 - 13:46
#145434
Well reasoned and insightful, to be sure. The fallacy is that you assume TPTB operate with the same sane reasoning and principles. They don't. Any reasonable course of action can be trumped instantly with a nice sized political contribution or a passioned appeal (by a lobbyist) to one's "principles". The first and most basic problem to solve is to institute some term limits amongst our elected officials.
on Mon, 11/30/2009 - 20:33
#147039
Your post, and Marla's, are reasonable. I think the bigger issue, though, is the whole financialization of the economy since the 1970's. Why are so many people working in the financial economy, as opposed to, say, productive capitalism? All these algorithms to profit from changes in exchange rates or milliseconds have not made my life as an end user of anything any better. Some of the so-called positives are to prevent me from being shafted in this dysfunctional finance-based economy in the first place. Additionally, I'd argue that things are markedly worse than before the Lords of Wall Street declared their control of the US.
If Las Vegas and Atlantic City had been in control of the US government for the last 30 years or so, what would the laws be today? Would those laws be positives? We might be here debating the merits of laws limiting "mechanics", the card cheaters who work for the house. Those guys are surely needed to provide liquidity in Vegas.
on Sat, 11/28/2009 - 21:58
#145162
This tax idea is all about getting me. Yeah, that's right, ME. I'm the ONE GS needs to eliminate from the trading scene. Why? Cause I'm the one who has solved the enigma of how astrology controls the markets. I know how and they don't. They'll never figure it out. And I am RAPING them every day on every trade. That's why they have their Congressional Lackies going after me. And it won't be a per trade fixed amount. It's going to be a % of the Trade amount. And for sure they will be exempt.
on Sat, 11/28/2009 - 22:29
#145176
Borrow your liquidity from the Fed and the Treasury at zero (and knowing that the government will backstop your crooked game), play pattycake with the few remaining market participants (your pretend competitors in the casino cartel) as you run the market up (skimming fees all the way), pay yourself large, ill-gotten bonuses, and when you get those bonuses, buy gold and store it in off-shore tax havens.
Sorry, Anon #145161, liquidity is an illusion funded by the American taxpayer. Paper assets are a mirage.
The whole system is based on faith and trust that was ripped out with extreme prejudice last fall. The only thing not (yet) outsourced to foreigners is the American military and the New York Cartel.
on Sat, 11/28/2009 - 22:48
#145182
Lets just give the SEC all their caseloads on a silver platter and call it a "donation"... otherwise its a bridge to nowhere
on Sat, 11/28/2009 - 22:56
#145188
Normally I would vote against any such tax but as long as it's administered fairly to all, then it "possibly" could reduce the rampant HFT that isn't good for the markets.
I'd rather have this kind of tax as it would probably make the markets a much longer term objective for most investors. As a daytrader I'd get hit but I think that GS et al skimming a few pennies on millions of transactions each day is definitely NOT helping the markets.
The devil is in the details of course ;)
on Sat, 11/28/2009 - 23:00
#145191
Ya know..............those of you who emotionally participated in this debate need to consider that you've been seriously sucked in. I mean really, do you think this argument, one side or the other, has more significance than a hill of beans? C'mon, people........NO ONE CARES WHAT ANYONE THINKS ABOUT THIS PROPOSAL SINCE IT'S NOT AND WILL NOT BE ON THE TABLE.
on Sun, 11/29/2009 - 07:14
#145294
I'm glad you didn't get emotional.
on Sun, 11/29/2009 - 08:16
#145305
With all due respect--Wrong. This tax will be debated as part of the next stimulus bill--perhaps before the end of the month, but certainly early next year--Count on It.
on Sat, 11/28/2009 - 23:03
#145194
As I understand it, taxes paid are generally deductible from taxes due as there is still a general unwillingness to tax a tax.
In principal, a tax would help level the playing field. I pay a minimum of $19.90 for every executed trade. $9.95 to buy, $9.95 to sell. I doubt brokers pay any fee at all and generally collect these fees from which they already pay any applicable taxes.
At $20 then, any stock I buy requires a .20 cent move to break even on a 100 share transaction. To watch the sheer volume of 100 shares transactions that fly by on so-called "penny stocks" makes it clear that few are as constrained by the .20 threshold.
Citi at $4 requires a 5% move to break even for the retail investor and Friday's volume was 260 million of which probably 98% were 100 share transactions.
To the extent then that other market participants can be said to pay substantially less or nothing (and I know of ways to pay substantially more as well as less), how can it be said that the market present a level playing field?
Taxation then is a politically incorrect term. Something like "tariff" would be more to the point. In differentiated exchanges, if a zero fee broker wants to trade against another zero fee broker, then no tariff is imposed. But the market is set in the exchange of the retail investor where all are subject to a "equalizing" fee (already imposed to some extent on the retail investor), commission (options), or tarrif.
on Sun, 11/29/2009 - 08:21
#145307
You are assuming that this will be a tax as defined by the Internal Revenue Code. Also, not all taxes are deductible.
If it is characterized as a fee, it may not be deductible as well. For example Section 31 fees that are fees levied on stock sales and options trades, the proceeds of which are used to fund the SEC, are not deductible. Anyone who has ever sold a stock or closed an options position has paid this "tax"--do you ever remember deducting this fee from your income?
on Sat, 11/28/2009 - 23:05
#145196
The Tobin Tax is a dead idea from dead economic thinking. There is no justification for confiscation on this level, even if you do think it would kill the squid. This kind of garbage comes up every depression when "speculators" are blames for volatility in the market. Just like "short-sellers" are blamed for collapses.
Face it, the government is broke and is desperate for a new source of revenue and will consider anything to bring in more taxes. No more of this supposed objectivist logic of "there's no benefit to society from trading". Ricardo proved that logic incorrect nearly 250 years ago.
on Sun, 11/29/2009 - 08:23
#145308
1000+
on Sun, 11/29/2009 - 22:53
#145831
"No more of this supposed objectivist logic of "there's no benefit to society from trading". Ricardo proved that logic incorrect nearly 250 years ago."
Granted that this is true, and that therefore the socially optimum size of the financial industry is far above zero, and even well above the smallest possible size that could sustain an industrial economy. But it doesn't necessarily follow that the current financial industry shouldn't be a lot smaller than it is. By analogy, it's undeniable that real estate has plenty of benefit to society, but equally undeniable that there's often much too much construction during housing bubbles.
If you do want to take the further step and argue that the financial sector isn't too big, then the obvious argument to make is that market forces do the job of keeping the sector at roughly the right size for any given time. That's a weighty argument, but it seems there are reasons to doubt it. First, the construction-bubble analogy comes into play again, suggesting that things might not necessarily work like that. Second, it's not hard to think of market distortions (credit subsidised by depositor guarantees and TBTF?) and/or market failures (Fisher/Minsky-style credit cycles?) that might hypothetically cause the financial sector to grow too large. Third, when you look at how the financial sector grew as a proportion of the economy between 1983 (or 1993 or even 2003) and 2007, it seems almost impossible that finance was just the right size in '93 and just the right size in '07, or that it was vastly undersized in '93 and just the right size in '07. There can't be many people nowadays who would claim the finance boom produced the enormous gains to the real economy that would be needed to justify such an expansion.
So I find it hard to escape the conclusion that finance was much too big in 2007, and probably is now. Of course, that doesn't necessarily prove that a Tobin tax is the right response. It might be a wrong solution; it might even be an ineffective solution; if the financial markets slump again shortly, it might be a wrongly-timed solution, a classic example of pro-cyclical regulation. And then there are the political consequences of cutting Congress in further on the financial game. But the problem seems to be real.
on Sat, 11/28/2009 - 23:13
#145202
Super easy solution.
Tax ALL sales at one percent. But eliminate capital gains tax from equity gains. That would put a damper on high-frequency sales (or raise quite a bit of revenue).
on Sun, 11/29/2009 - 10:53
#145309
So say I sell a call with a $1000 face value and make $50 on the trade-- you think it is "good" that Uncle Stupid gets to tax 2.5% of the profit on top of the ordinary income tax marginal rate? Hello- come in earth.
on Sat, 11/28/2009 - 23:27
#145207
Dearest fellow ZH readers,
I'm more than a bit surprised by the populist, pro transaction tax rhetoric. One wonders if any of you have thought this through. Markets, like ecosystems, require a diverse group of participants with different goals and time frames to function effectively. To say there is no "societal gain" from trading is absurd on so many levels it is hard to know where to begin. Traders and speculators are the ones buying your shares of AAPL when you decide to start cashing out your IRA. They are the ones who step in and start buying when the Dow is down 300 points like this past Fri. Eliminating this layer of liquidity from the market increases volatility and increases the likely hood of a crash and makes as much sense as eliminating sharks from the ocean or snakes from the dessert. All of them are necessary parts of the whole.
As currently proposed all stock transactions would be taxed at .0025% of the value of the transaction. A typical swing trader might be trying to capture a 1% move in SPY. If you traded 5000 shares the value of your transaction would be roughly $550,000. The one way tax on this trade would be $1375.00 or $2750.00 round trip (regardless of profit or loss) in an attempt to make $5000. Obviously no one will be trading with any time horizon shorter than buy and hold. Not GS, not MS, not hedge funds, not mom and pop. Essentially everyone will be on the same side of all trades.
And I ask all of you what amount of volume on the exchanges do you folks think comes from short term trades. 50%? 60%? And how much of the current value of the market is due to speculation. Again,50%? You all think this is punishment for the big boyz, but I would think long and hard about that. A 50% drop in the value of the NYSE hurts all of us. It hurts our 401K, it hurts pension funds. And do any of you think that in this digital age there is one thing that would prevent our exchanges from moving to a country which is not stupid enough to impose a transaction tax? If you want to punish GS then go after them directly. Please, let's not cut of our collective nose to spite our face, and please, spare us all the sanctimonious crap about societal gain.
on Sun, 11/29/2009 - 00:21
#145229
couldnt have said it better !
on Sun, 11/29/2009 - 02:16
#145269
"spare us all the sanctimonious crap about societal gain." Yes, greed is good after all.
I think that you are under stating the numbers a little bit. I fully expect a sufficiently harsh tobin tax to drop volume by about 70%. Maybe even more. It will make a lot of companies go bankrupt. And yes the 401K and pension funds will be severely hurt.
The thing is, this will happen anyway. Maybe not quite as severe, but 100 p/e? You can't be serious that you think that the market can stay here, can you?
In the end, we have to pay the interest on our national debt. Which other tax would you prefer?
on Sun, 11/29/2009 - 08:32
#145310
is est non logical causa..
--sorry--way to many random fragments here--
on Sun, 11/29/2009 - 14:13
#145453
Well, I don't have a clue where the market should be. Do I think current prices are sustainable or realistic? No, I don't, but that is just my opinion and I have been wrong so many times it isn't funny. I thought the market pricing was ridiculous in the 80's. I was convinced the entire charade could go on no longer and that we were all doomed to collapse and depression. Boy was I wrong, and that gets to the intent of my post. Are markets irrational? Absolutely. Do they overshoot to the upside and the downside? Of course. But the more diverse the opinions and goals of the participants, the less likely things are to stay at one extreme or the other. Are the markets a gamble? Of course...but what in life isn't a gamble. You make a calculated risk reward analysis every time you pull your car into traffic. We gamble that our career choice will work out, that the business we open will be a success, that our spouse will be faithful and our children will be born without a birth defect.
Greed is just one of many emotions and in the correct balance neither good nor bad. Greed adds a lot of energy to our economy. It is the driving force of capitalism and ideally should be tempered by fear. Capitalism has failed in large part because the element of fear has been removed by the knowledge that all loses will be socialized, while all profits are privatized.
The point of my post was to get us thinking about the transaction tax as has been proposed because as proposed we will kill the goose that laid the golden egg. All trading will essentially cease because it will no longer be profitable to trade on any time frame other than buy and hold. There will be no net increase in tax revenue because the targeted trading activity will cease....period. Is this really what we want to do. If a tax is to work it must be small enough to be almost unnoticed by market participants. Paying the interest on the national debt is easy...stop increasing it. Stop being the worlds policeman and use the money to rebuild the energy footprint of the entire country. Create jobs so there are more people paying taxes. As it is now we are trying to raise taxes on fewer and fewer middle class taxpayers. And by all means....go after the Vampire Squid directly. Asses a special tax on all their profits and use the money to shore up the rest of the financial system.
on Sat, 11/28/2009 - 23:30
#145209
I think we should have a fart tax.
on Sat, 11/28/2009 - 23:30
#145210
so once we collect all the transaction taxes what's it going to be used for? bailing out insolvent institutions?
on Sun, 11/29/2009 - 08:33
#145311
Ha ha ha ha--Yep!
on Sat, 11/28/2009 - 23:33
#145211
This tax... if enacted, who will get to bag it? The people? Haha... Sorry to crash the party, but it must be noted here that all, the so called, "laws" purporting to "protect the public" are here for one reason alone - to feed and thereby to immortalize the squid... "Tataglia is a pimp. It was Barzini all along."
on Sat, 11/28/2009 - 23:35
#145214
In principle I support a Tobin Tax, if it could be fairly and universally applied, at a small enough level to not materially affect the "little guy", of which I am one.
I'm a swing/position trader, who does this for "intellectual activity" and to augment other sources of income, which when combined with the "better half's" job, add up to a stable if modest standard of living.
If the tax could be enacted, enforced, and collected by fair and just rulers, I would have no objection, although it would widen spreads and add to overhead.
But, that having been said, I'm afraid if the tax is enacted it will be imposed only only on "the little people" and exempt any and all squids, market makers, hedge funds, TBTF banks, or other institutions.
As Leona Helmsley once said, "Only the Little People pay taxes".
KptLt. laughing swordfish
9er Unterseeboote Flotille
on Sat, 11/28/2009 - 23:49
#145219
You might want to clarify what a "yea" or "nay" vote means in this context. It is nebulous, because the proposition itself is case in the negative.
on Sun, 11/29/2009 - 00:38
#145236
LoL. I was going to say something about that but I didn't wanna make waves.
Maybe it was written after composing a bunch of Captcha questions?
on Sun, 11/29/2009 - 12:33
#145405
Yeah, we don't want "Anonymous" to be profiled..
on Sun, 11/29/2009 - 20:04
#145693
http://www.imdb.com/video/screenplay/vi2059338009/
on Sat, 11/28/2009 - 23:51
#145220
Any tax is bad and just winds up getting passed on to the consumer or in this case, investor. I vote a big no on this tax!!!:))
on Sun, 11/29/2009 - 18:01
#145603
Yet, strangely enough...GS is NOT returning their profits to shareholders but, giving it in large part as bonuses...I guess you get screwed either way.
on Sat, 11/28/2009 - 23:56
#145222
Market micro-structure has been negatively transformed in the last few years, it's has become fragile and dangerous.
http://www.youtube.com/watch?v=V4cRYI2x60Q
A Tobin tax is one way to rebalance it, simple,direct. There are other ways, but nothing more complicated will be understood by politicians or constituencies.
on Sun, 11/29/2009 - 00:08
#145225
The identities of the debaters should have been kept private as it may influence the polling.
on Sun, 11/29/2009 - 00:29
#145230
If we do a transaction tax then it should be collected the same way the law is enforced upon the Federal Reserve. All market participants fill out a quick form and submit it to a local clerk twice each year. Questioning the participant would be outlawed since that would impede the participants ability to set their own monetary policy. In this submission participants would self declare only what they believe should be in the public sphere since disclosure of other information could impair the perception others have of them and potentially adversely effect their stability and ability to engage in commerce.
on Sun, 11/29/2009 - 00:31
#145232
What do we need a new tax for? Just print more money.
on Sun, 11/29/2009 - 09:44
#145323
"Strictly speaking, it probably is not necessary for the federal government to tax anyone directly; it could simply print the money it needs. However, that would be too bold a stroke, for it would then be obvious to all what kind of counterfeiting operation the government is running. The present system combining taxation and inflation is akin to watering the milk: too much water and the people catch on."
Congressman Ron Paul
on Mon, 11/30/2009 - 00:48
#145932
Which makes the 3-ring circus around this tax 'debate' all the more amusing.
on Sun, 11/29/2009 - 00:34
#145234
Much of what I have read just does not make sense.
Who would want more taxes? Is this anger toward HFT?
I vote for a black box exchange where only computers can trade. The AlgoExchange. Then the NYSE can go back to trading among humans only. The two exchanges never interact and if the algo's ever display sympathy towards price movement at the NYSE the algo owner gets fined and taken off line.
Bring the floor back.
Then tax the HF traders. And tax them hard.
on Sun, 11/29/2009 - 00:45
#145237
The tax idea is akin to a village gathering to discuss politely asking the Viking raiders that pillage them every year to please share "their" profits with the villagers.
It's hardly a radical enough solution is it?
Finance, trading and speculating are important parts of the economy, they just shouldn't be the economy. When they become dominant the fact that they cannot, in themselves, originate value eventually comes more and more clearly into focus: they will force the public into playing the role of the final "greater fool" because their activities, in aggregate, have not added any value. Worse yet, the profits to finance are greatest when the assets being ramped are the least encumbered by anything so boring as a predictable cash-flow - think housing - so there's a bias toward the disastrously ridiculous and destructive (Icelanders as master bankers, the abomination known as Dubai.)
Unregulated finance is a doomsday device.
- break the big banks up
- reinstate Glass Steagall
- wind down off-market derivatives trading
- shrink the sector
If you want a tax, how about a personal tax on all finance industry employees above a certain payscale that is ear-marked to fund a new regulatory agency.
Oh and a tax on lobbyists. Maybe by the word.
on Sun, 11/29/2009 - 01:01
#145244
People that are against taxes in general & other forms of government confiscation of personal property will be against a transaction tax - but they're not looking at this correctly.
It shouldn't be looked at as a tax at all, but rather as a leveling of the price of poker ... ante up, everyone.
on Sun, 11/29/2009 - 01:06
#145246
ZH,
Bravo on the Lincoln-Douglas layout! Been a while since I competed in those.
on Sun, 11/29/2009 - 09:54
#145330
Hey, if Lincoln didn't really care about the blacks, maybe the banksters don't really care about us either:
"In his assessment, Bennett contends that Lincoln was, in fact, a white supremacist-- a political figure who made no secret of his belief in separation of the races, and a man who had no predisposition to tend to the ills of black folk. In what Bennett calls "one of the supreme ironies of history," Lincoln was "forced by circumstances to attend to the Negroes..."
http://www.ebonyjet.com/politics/national/index.aspx?id=11476
"I will say, then, that I AM NOT NOR HAVE EVER BEEN in favor of bringing about in any way the social and political equality of the black and white races---that I am not, nor ever have been, in favor of making voters or jurors of Negroes, nor of qualifying them to hold office, nor to intermarry with White people; and I will say in addition to this that there is a physical difference between the White and black races which will ever FORBID the two races living together on terms of social and political equality. And inasmuch as they cannot so live, while they do remain together, there must be the position of superior and inferior, and I, as much as any other man, am in favor of having the superior position assigned to the White race."
- Abraham Lincoln
on Sun, 11/29/2009 - 18:11
#145610
And, since Obama thinks he is Lincolnesque?
Hmmm....
on Sun, 11/29/2009 - 23:24
#145862
Just tall, skinny, with big ears, that's all, really. Move along now...
on Sun, 11/29/2009 - 01:38
#145258
As a matter of policy, I would always vote for no new taxes.
And there's already SEC tax on each transaction when stock is sold. Look through your brokerage statements for SEC fees.
on Sun, 11/29/2009 - 01:53
#145263
We in India have had a securities transaction for quite some time now. It has not impacted our market in any visibly negative manner.
It certainly makes life harder for scalpers. However the proposition that scalpers need to be prosperous to ensure prosperity of the universe of market participants is flawed at best. The tax collection is done by the broker who executes the transaction and then deposits it with the government. The mechanics of this ensure it is fair and equally applicable to all the market participants.
on Sat, 12/05/2009 - 17:05
#154059
Not only scalpers but its hard to get in and out of positions for a swing trader with the reduced liquidity. Thats why Indian and other thrid world country exchanges move 10% when Dow moves 3%, there isnt enough cushion and liquidity to support the panic mom and pop speculators.