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Holy crap do we need a financial transaction tax

fskimospy

Elite Member
Mar 10, 2006
70,750
20,152
136
Why was it so calm in 2007 and suddenly go crazy?
Two main reasons from my understanding. First, advances of technology have vastly increased the speed of transactions possible with HFT. Second, more people are doing it.
 

bfdd

Lifer
Feb 3, 2007
13,312
1
0
eskimospy, I agree we definitely need market fees(what you call transaction tax). I think they would go a long way to stop all the risky gambling that's causing huge loses.
 

BoomerD

No Lifer
Feb 26, 2006
56,042
4,412
126
So...a national sales tax on market transactions?

I'm fine with that.
 

fskimospy

Elite Member
Mar 10, 2006
70,750
20,152
136
So...a national sales tax on market transactions?

I'm fine with that.
Basically. You could make it extremely small and still annihilate this high frequency trading. I don't know the exact details of course but if I remember reading correctly it could possibly be a penny or less.
 

fskimospy

Elite Member
Mar 10, 2006
70,750
20,152
136
I would be too as long as the money is used to lower other taxes.
If done correctly it wouldn't really raise much money at all. The point is not to generate revenue, it's to curb dangerous behavior.
 

CPA

Elite Member
Nov 19, 2001
30,324
4
0
why again do we need a tax? And how will that decrease risk exactly? BTW, SEC already charges a fee for a transaction. So, there's already a tax.
 

BoomerD

No Lifer
Feb 26, 2006
56,042
4,412
126
I would be too as long as the money is used to lower other taxes.
Or better yet, use it to repay the citizens for all the money we spent bailing out the banks after they crashed the economy with their bullshit trading in credit default swaps.

Too big to fail? Nope...too big to bail out.
 

momeNt

Diamond Member
Jan 26, 2011
9,299
349
126
It would be a lot easier to just put a latency before you can pull a quote. Many of the manipulations come from quote stuffing where quotes are put in and essentially instantly retracted, the price manipulation is there but without a sale. If a latency were to be put in, even just an extremely small one, your quote stuffing attempt would get sniped.

Of course NPR says to tax it so that's probably the best idea...

Edit: To be clear, most of the manipulation occurs without a transaction taking place.
 

BoberFett

Lifer
Oct 9, 1999
37,587
9
81
The stock market long ago stopped being a vehicle for investment and is now nothing more than a casino.
 

fskimospy

Elite Member
Mar 10, 2006
70,750
20,152
136
why again do we need a tax? And how will that decrease risk exactly? BTW, SEC already charges a fee for a transaction. So, there's already a tax.
Yes, the tax is very small as is but it already eats up a large percentage of high frequency trading profits. If you make it slightly larger you will still barely affect normal traders but you can get rid of this dangerous activity.
 

fskimospy

Elite Member
Mar 10, 2006
70,750
20,152
136
It would be a lot easier to just put a latency before you can pull a quote. Many of the manipulations come from quote stuffing where quotes are put in and essentially instantly retracted, the price manipulation is there but without a sale. If a latency were to be put in, even just an extremely small one, your quote stuffing attempt would get sniped.

Of course NPR says to tax it so that's probably the best idea...

Edit: To be clear, most of the manipulation occurs without a transaction taking place.
Blah blah, NPR LIBRULS.

If there are other ways to crack down on this I'm totally down for that too, it doesn't have to be a tax.
 

sm625

Diamond Member
May 6, 2011
8,176
135
106
It is perfectly predictable. More and more federal reserve funny money notes go from thin air into the pockets of the top 0.1%, and in the process everyone else's money becomes worth less so we pay $4,$5,$6,$7 a gallon for gas, and dont do a damn thing about it. A financial transaction tax doesnt stop any of this. It just lets the crooks in govt profit as well from the heist.
 

Matt1970

Lifer
Mar 19, 2007
12,321
2
0
A financial transaction tax doesnt stop any of this. It just lets the crooks in govt profit as well from the heist.
This.

Did the Cigarette tax stop people from smoking?
Did the alcohol tax stop people from drinking?
 

fskimospy

Elite Member
Mar 10, 2006
70,750
20,152
136
This.

Did the Cigarette tax stop people from smoking?
Did the alcohol tax stop people from drinking?
Are you joking? First of all, evidence shows that increases in cigarette taxes have a dramatic effect in decreasing smoking rates.

Secondly, the point of HFT is to make money through tons of small transactions. It is in fact quite simple to make lots of small transactions unprofitable. If you can't make money doing it, nobody will do it.
 

momeNt

Diamond Member
Jan 26, 2011
9,299
349
126
Blah blah, NPR LIBRULS.

If there are other ways to crack down on this I'm totally down for that too, it doesn't have to be a tax.
I just told you a way to crack down on it. A minimum active quote latency.
 
Nov 29, 2006
14,521
2,261
126
If done correctly it wouldn't really raise much money at all. The point is not to generate revenue, it's to curb dangerous behavior.
So with a minimal penalty what is the advantage of this? Wont they just take the hit and keep doing it since it still makes the money?
 

CPA

Elite Member
Nov 19, 2001
30,324
4
0
Yes, the tax is very small as is but it already eats up a large percentage of high frequency trading profits. If you make it slightly larger you will still barely affect normal traders but you can get rid of this dangerous activity.
How is a small, negligible tax on a transaction going to affect dangerous activity? Those costs are just going to be passed on to the investor as a cost of doing business. Plus, the vast majority of stock transactions are from mutual funds, 401K's and pensions. The fees will be assessed in those funds and most cases won't be known to the plan owner until many years later. Maybe I'm naive, but I'm not seeing how a tax is going to effect risk or "dangerous activity".
 

ichy

Diamond Member
Oct 5, 2006
6,940
6
81
Or better yet, use it to repay the citizens for all the money we spent bailing out the banks after they crashed the economy with their bullshit trading in credit default swaps.
In the end the US government made a profit on a lot of those bailouts.
 

the DRIZZLE

Platinum Member
Sep 6, 2007
2,955
0
76
If done correctly it wouldn't really raise much money at all. The point is not to generate revenue, it's to curb dangerous behavior.
This. If the transaction tax was high enough to raise a significant amount of revenue, it would also be high enough to cause huge distortions in the prices of different assets and limit liquidity. It just needs to be big enough to limit HFT.
 

gevorg

Diamond Member
Nov 3, 2004
5,075
1
0
HFT is like bitcoin mining, complete waste of resources and no advancement for humanity :D
 

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