Financial speculation tax

[Engineer]

ever heard of dynamic ip?

What does that have to do with a financial speculation tax?

Hoping that it will keep you from being banned? :ninja:

 

[brencat]

There's reasonably broad agreement that Wall Street has become parasitic - extracting wealth a lot as opposed to helping it get increased.

For one statistic, 70% of all trades done now are by computers done at high speed to try to take advantage of fast access to information to quickly make a little - a lot.

That has little to do with the purpose from society's point of view for stock markets to help capitalize businesses and grow the economy.

Whether talking about that or other activities, some sort of 'micro tax' to help discourage unproductive and even harmful actions might make sense. Europe seems to favor it:

http://www.commondreams.org/view/2011/06/11-1

I'm not completely against a small transactions tax on high frequency trading. But if it were extended to other asset classes, it could be a real problem.

Give you an example, let's say I'm an institutional trader trading high yield or convertible bonds and I line up a seller and a buyer and I want to trade for 1/8th pt. My market is 100 - 100.125, 5mm up. If the amount I'm trading is 5mm face each (10mm face total) of bonds priced at par for simplicity's sake, that means I'm only making $12,500 by doing this trade. A 0.05% tax on 10mm face bonds would cost me $5k. So effectively, my spread shrinks to 0.075 pt. Guess what? I'm going to widen out my market next time to make up for this tax and who gets hurt? -- that's right, it's the clients.

100 - 100.25 on the comeout suckers.

 

[brencat]

:hmm::whiste:

I see what you did there :biggrin:

 

[MovingTarget]

"it" being? Doesn't your question rely on buying the premise of the OP and his notion of wall street being parasitic and of no real value?

Not quite. I have stated that Wall Street does have value and does serve a valid function as part of a healthy economy. It becomes parasitic when it grows so much that it stifles the growth of other sectors of the economy that it is supposed to help (by making credit available, earning interest, etc.) through its valid functions. That is what has happened.

 

[MovingTarget]

we should just jail the people who fuck other people and make the rich pay when they screw up

and the fed should do its job instead of serving alcohol to the banks until they fall off the cliff

At least we agree on something! :awe:

 

[MovingTarget]

They could add a $.05 tax on every non-executed trade over a thousand a day or so and cut this bullshit out. That wouldn't touch anyone other than HFT in any way and even if you went over the threshold once or twice it would be a negligible cost. By design the majority of offers HFT computers make are not executed, that is how the game works, so they would basically be put out of the cheating game (at least this one).

Unfortunately, the government has not and they will not.

That is an interesting proposal. I didn't even think about these non-executed trades. :hmm:

 

[glenn1]

There should be a Wall Street tax until AIG bailout is repaid.

So because AIG, an insurance company, needed a bailout, you'd levy a tax on a minimally related industry like Wall Street? That would be like putting a tax on gas stations because General Motors needed a bailout.

 

[Darwin333]

I'm not completely against a small transactions tax on high frequency trading. But if it were extended to other asset classes, it could be a real problem.

Give you an example, let's say I'm an institutional trader trading high yield or convertible bonds and I line up a seller and a buyer and I want to trade for 1/8th pt. My market is 100 - 100.125, 5mm up. If the amount I'm trading is 5mm face each (10mm face total) of bonds priced at par for simplicity's sake, that means I'm only making $12,500 by doing this trade. A 0.05% tax on 10mm face bonds would cost me $5k. So effectively, my spread shrinks to 0.075 pt. Guess what? I'm going to widen out my market next time to make up for this tax and who gets hurt? -- that's right, it's the clients.

100 - 100.25 on the comeout suckers.

What about a set tax per un-executed trade (put up and then taken down) after X amount a day with X being above what any human could realistically put up and take down in a given day?

 

[cutforscience]

What about setting an annual fee for the right to use one of these supercomputers?

 

[Acanthus]

So because AIG, an insurance company, needed a bailout, you'd levy a tax on a minimally related industry like Wall Street? That would be like putting a tax on gas stations because General Motors needed a bailout.

Err...

Goldman had over $6B in AIG derivatives that were paid to them directly because of the bailout.

They are not "minimally related"

 

[Jhhnn]

The proper term would be "transaction tax" as it would tax each transaction.

Since the tax is charged on every transaction it makes massive computer trading less profitable and actually gets the market closer to its original intent.

Unless we can come up with a better idea this might be what we need to restore some sanity to Wall Street.

I actually agree with PJ. Remarkable.

If a .25% tax makes a trade unprofitable, it'll reduce volatility & profit taking by the big boys who're currently using technology to make money from market "noise".

Besides that, Uncle Sam needs the money, regardless of all the raving on the right to cut, cut, cut spending.

 

[soccerballtux]

I agree. Although Wall Street does provide a necessary and beneficial role in the economy, as of late they have become parasitic. Perhaps this will even the playing field between the big firms and regular investers. We need to put the breaks on Wall Street's irresponsible actions and return them to their proper role - as the grease on the gears of the economy and not a siphon in its gas tank.

not opposed to outlawing or taxing high speed trading. It brings no value to normal people trying to invest for the future, but rather exposes them to significant risk that they have no means of protecting themselves from.

 

[KGB]

i don't think wall street is parasitic

it accounts for a large part of the GDP

GOP!!! not GDP...

 

[cutforscience]

I actually agree with PJ. Remarkable.

If a .25% tax makes a trade unprofitable, it'll reduce volatility & profit taking by the big boys who're currently using technology to make money from market "noise".

Besides that, Uncle Sam needs the money, regardless of all the raving on the right to cut, cut, cut spending.

it doesn't really give them an advantage over the average value investors. it just gives them an advantages over amateurish speculative investors.

 

[Acanthus]

it doesn't really give them an advantage over the average value investors. it just gives them an advantages over amateurish speculative investors.

It does it to everyone.

If a stock is trending up you can almost never buy it at the ticker price because of HST. You always have to go about 2% north of it.

Right now everyone is paying the Goldman Tax.

 

[child of wonder]

It isn't that often that I agree with you, ProfJohn, but you have expressed this better than I could have.

As was said earlier, we need a thread on what the purpose of the financial markets (aka "Wall Street") should be.

Better yet, any tax revenue generated from this fee goes straight towards paying off the national debt.

 

[MovingTarget]

Better yet, any tax revenue generated from this fee goes straight towards paying off the national debt.

I could live with that, provided that it is specifically earmarked for that purpose. I just wouldn't want it dumped into the general fund for congress to do as it pleases.

 

[brencat]

If a stock is trending up you can almost never buy it at the ticker price because of HST. You always have to go about 2% north of it.

Not true. Orders are filled based on price and time. A market order to buy will typically lift the offer immediately unless another market order for the quantity offered was received in front of you.

 

[Darwin333]

Not true. Orders are filled based on price and time. A market order to buy will typically lift the offer immediately unless another market order for the quantity offered was received in front of you.

That is why they have invested so heavily in better algorithms and servers colocated with the exchange, between the time that you hit enter and you actually own anything the computers can make and cancel thousands of offers they never intended to execute.

Like I said, you don't think they do all of that for fun do you? If it doesn't give them an advantage selling to the 30% of the market that isn't HFT they wouldn't have invested so much into it.

 

[YoungGun21]

Nothing like this will ever pass. If it does, expect it to be the ruin of this country's financial system.

Average holding time for a stock in 2010 was 11 seconds.

 

[cutforscience]

lol 11 sec? lol

 

[Acanthus]

Nothing like this will ever pass. If it does, expect it to be the ruin of this country's financial system.

Average holding time for a stock in 2010 was 11 seconds.

The financial system is not serving its intended purpose.

It is larger than it has ever been in history and is only serving to gamble enormous amounts of money on intangible factors to "generate wealth" on the backs of others.

It is rampant with fraud and purposeless in its current form.

The financial system needs to be halved, if not more, as it is.

 

[Jhhnn]

Nothing like this will ever pass. If it does, expect it to be the ruin of this country's financial system.

Average holding time for a stock in 2010 was 11 seconds.

Funny that. The Stock Market seemed to work better & be more stable prior to HST. If that bit about 11 second holding time is true, Uncle Sam will either make a shitpile of money or traders will be denied making money on what really is just noise in the market.

Anybody who thinks that honest value changes that fast needs to have their head examined. It's pure manipulation, making money out of nothing.

 

[Craig234]

The financial system is not serving its intended purpose.

It is larger than it has ever been in history and is only serving to gamble enormous amounts of money on intangible factors to "generate wealth" on the backs of others.

It is rampant with fraud and purposeless in its current form.

The financial system needs to be halved, if not more, as it is.

It might help to imagine a terrible country far more powerful than the US acting like the mafia, demanding 'protection money' be paid by the US amounting recently to 30% of all profits in the country (Wall Streetmade 40% of all profits, so let's say a fourth of that was for legitimate activities).

That would have an enormous drain on our economy adding to the cost of any business activity - but that's what we basically have now.

It's the same level of overhead of non-productive loss overhead to our economy, it's just people taking advantage of activities being legal they lobbied for, not the mafia.

 

[Craig234]

Another idea, complementary to a financial speculation tax: public banks

http://www.commondreams.org/view/2011/06/12-3

These issues are a bit complicated, and it's pretty useless with people who don't look at the issues but just simplistically say 'government yuck!'

But there are great benefits to such a thing, and it's pretty clear some change is needed to reduce the big problems.

For example, France uses public banks, if I understand, to help stabilize the ownership of some industries, helping to allow for long-term planning in contrast to the "WE WANT PROFITS TODAY!" short-term investors driving the policies for the companies that harm the long-term interests of the companies and the country.

It's interesting to see several states are considering something along these lines already - that gets basically no press I've seen.

I hadn't even heard about the California bill - and am a bit surprised to see a state like Arizona with a bill.