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Financial speculation tax

C

Craig234

Lifer
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 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.
 
Is Wall-street fulfilling its intended role?

That's a great question, and you really need to frame a discussion around that as opposed to a single solution to it. That tax idea may or may not be enough and we can try to understand this as we focus on the big picture.

While I remain skeptical of you, the notion itself has its merits to discuss. I'll refrain as I have not even thought about it before. One might wonder if this is related to speculation on the price of gas, which has been the bane of all Americans.
 
Wall streets role is supposed to be providing capital to companies, and in return earning interest.

Obviously that is a very general description, you can include M&A activity making companies more efficient, etc.

The vast majority of wall street is no longer providing this service. It has all gone to options and derivatives and basically minute to minute gambling. The electronic advantage is just horrible for regular traders trying to actually invest.

My solution wouldn't be a tax. It would be a 1 trade limit for any company AND ALL OF ITS SUBSIDIARIES per day on a stock / option.

This will stop the leeching overnight and dramatically reduce volatility.
 
Acanthus said:
My solution wouldn't be a tax. It would be a 1 trade limit for any company AND ALL OF ITS SUBSIDIARIES per day on a stock / option.

This will stop the leeching overnight and dramatically reduce volatility.
Click to expand...

Bwaahahahahahaha, you can't possibly be serious?

Options actually reduce volatility and allow for hedging, among their many other uses. 1 trade per day, wow, you know absolutely nothing about Wall St. Let's go back to paper tickets and late 19th century volumes while we're at it too.
 
High speed trading is a fvcking joke if there ever was one. These clowns are literally setting up their data centers as close as they can to the transaction points--physically, geographically--to limit latency and get their trades in quicker. Nobody can tell me that behavior like that is a benefit to society in any way.

High frequency trading was a key motivator in the flash crash a year ago.
 
Its just more of the same ol same ol. The economy becomes more complex and requires more regulation. I don't know if taxing Wall Street is the way to go, but clearly they've been given all the freedom they could ask for to develop the derivatives and options markets and have made a mess of the playing field.
 
Doppel said:
High speed trading is a fvcking joke if there ever was one. These clowns are literally setting up their data centers as close as they can to the transaction points--physically, geographically--to limit latency and get their trades in quicker. Nobody can tell me that behavior like that is a benefit to society in any way.

High frequency trading was a key motivator in the flash crash a year ago.
Click to expand...

If anything, that behavior only serves to enrich a few and increase volitility for everyone else. It has made the markets focus even more on short term gains versus long term viability.
 
I say do away with the Stock Market. Im sure im an army of one in my thinking though. If you want capitol go get a business loan from a bank with a good business plan. Whenever you hand over your company to the stock market you are now at their beckon call for profit, profit, profit at all costs.
 
Bad idea.

The last thing we need is to invent new taxes.

If Wall Street has a problem, and I think they do and there are many, then just fix them. Just because WS is fvcked up is no reason to hand the federal gov more money to blow.

Dumb progressives/libs/dems - got a problem? Just tax it. Yeah, like that'll fix it. Jeebus.

Fern
 
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Fern said:
Bad idea.

The last thing we need is to invent new taxes.

If Wall Street has a problem, and I think they and are many, then just fix them. Just because WS is fvcked up is no reason to hand the federal gov more money to blow.

Dumb progressives/libs/dems - got a problem? Just tax it. Yeah, like that'll fix it. Jeebus.

Fern
Click to expand...

How do you suppose we fix it then? Aside from the rediculous "starve the beast" sentiment expressed here, you don't seem to offer any real alternatives to "fixing the problem". Wall street needs effective regulation and oversight, which the recent era of deregulation has shown to us again. A tax/fee on transactions would serve to limit the # of trades, thus increasing the incentive to plan/invest wisely over the long term versus the short term.

Besides, proper oversight requires resources, for which you need taxes to provide. It seems proper to place this burden on the industry that has caused so much damage as to necessitate that oversight. I'm open to other solutions, but so far, I haven't seen anything that would be effective. This might be.
 
MovingTarget said:
How do you suppose we fix it then? Aside from the rediculous "starve the beast" sentiment expressed here, you don't seem to offer any real alternatives to "fixing the problem".
Click to expand...

That's a different thread.

MovingTarget said:
Wall street needs effective regulation and oversight, which the recent era of deregulation has shown to us again. A tax/fee on transactions would serve to limit the # of trades, thus increasing the incentive to plan/invest wisely over the long term versus the short term.
Click to expand...

It's up to individuals etc to decide if they wanna invest short term vs long term. It's none of the gov's damn business.


MovingTarget said:
Besides, proper oversight requires resources, for which you need taxes to provide. It seems proper to place this burden on the industry that has caused so much damage as to necessitate that oversight. I'm open to other solutions, but so far, I haven't seen anything that would be effective. This might be.
Click to expand...

The S.E.C already charges a fee for it's oversight function. Has been since 1934.

http://www.investopedia.com/terms/s/secfee.asp

Fern
 
How about a tax on all trades based on time using a LIFO algorithm?

Have the tax rate set to 100% for instantaneous trades, falling by some exponential function down to asymptotically approaching 0% for t=infinity. Adjust your constants so it makes sense.
 
Craig234 said:
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
Click to expand...

It is for the most part already a violation of SEC policy and they should be fined heavily for it. On top of that it should actually not be legal because it gives them an insanely unfair advantage when their computers are colocated as they currently are.

Remember the "Flash crash" that was swept under the rug? Those computers are what caused that and as far as I can see they have absolutely no value to anyone but the owners and steal value from honest traders who can not compete.
 
Fern said:
1) That's a different thread.



2) It's up to individuals etc to decide if they wanna invest short term vs long term. It's none of the gov's damn business.




3) The S.E.C already charges a fee for it's oversight function. Has been since 1934.

http://www.investopedia.com/terms/s/secfee.asp

Fern
Click to expand...
1) Fair enough.
2) It is still up to individuals. People will still be able to make that decision without interference. I'm not proposing that we mandate people invest long term. Providing incentives like this only tips the scales. Things are too out of balance as it is, so something must be done else we end up with the kind of volitaility worse than what we've recently experienced.
3) Good point. The SEC (or similar body) needs to employ increased oversight over this type of trading too. The proposed tax/fee should go to that entity. As of right now, the role of the SEC is too limited in the markets and its oversight is nowhere near as effective as it needs to be. This proposal would help fix that.
 
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.
 
ProfJohn said:
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.
Click to expand...

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.
 
Craig234 said:
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
Click to expand...

any scientific evidence to back this up?
 
ProfJohn said:
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.
Click to expand...

Great idea. Bankers would fight this to the death though.
 
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