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Holy crap do we need a financial transaction tax

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JACKHAMMER

Platinum Member
Oct 9, 1999
2,870
0
76
The "working-class slug" doesn't have much risk involved in his/her wages compared to a investor.
Bullshit. There are plenty of working class folks who risk their lives or health everyday for their paycheck. One wrong move and its slipped disc or mangled limb. That's risk, not betting a portion of your trust fund.
 

Jhhnn

No Lifer
Nov 11, 1999
61,732
13,844
136
Here's a truly radical way to completely restructure taxation that would create a great deal more stability in the Stock Market, the Automated Payment Transaction Tax, which proponents want to replace all other forms of taxation-

http://www.apttax.com/

The financial elite is utterly horrified by the idea, of course, because it would render HST & other fast buck methods counter productive....
 
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Jhhnn

No Lifer
Nov 11, 1999
61,732
13,844
136
The "working-class slug" doesn't have much risk involved in his/her wages compared to a investor. Their wages are pretty much set in stone by their employer vs someone who invests thousands, or millions or even billions of dollars into a risky real estate deal or fledgling hi-tech company, etc only to have it go bust and they end up going broke. If we don't acknowledge the differences in risk then we will just kill investments in new ideas and stop the flow of investors money circulating through the economy.
Oh, please. The uber rich don't operate that way, at all. They allocate capital in such a way that even if one investment or one sector of investment takes an enormous hit, their lifestyles are untouched. They're enormously diversified at an international level, and base their decisions on asset preservation as well as potential gains. If one of them loses $100M on a real estate venture, they were free to do so because they probably had many times that in assets, anyway.

 

Dari

Lifer
Oct 25, 2002
17,136
37
91
IIRC, most HFT transactions are cancelled. At least 95%, possibly 99%. Also, if you get rid of the rebate that many market makers get then things could become more efficient.
 

nehalem256

Lifer
Apr 13, 2012
15,670
6
0
Oh, please. The uber rich don't operate that way, at all. They allocate capital in such a way that even if one investment or one sector of investment takes an enormous hit, their lifestyles are untouched. They're enormously diversified at an international level, and base their decisions on asset preservation as well as potential gains. If one of them loses $100M on a real estate venture, they were free to do so because they probably had many times that in assets, anyway.

So if transactions stayed at their current level, the APT tax rate would be three tenths of one percent (0.35%) on each transaction.
So if everytime you trade a treasury bond you had to pay .35% in tax what do you think this would do to interest rate on such bonds? What would this do to the liquidity in the bond market?

EDIT: sorry that was in reference to http://www.apttax.com/ he post in the previous post
 

Matt1970

Lifer
Mar 19, 2007
12,321
2
0
Oh, please. The uber rich don't operate that way, at all. They allocate capital in such a way that even if one investment or one sector of investment takes an enormous hit, their lifestyles are untouched. They're enormously diversified at an international level, and base their decisions on asset preservation as well as potential gains. If one of them loses $100M on a real estate venture, they were free to do so because they probably had many times that in assets, anyway.

You are talking about the 1/10th of 1% that can afford to lose 100Mill. If that.
 

glenn1

Lifer
Sep 6, 2000
25,388
1,013
126
This sums it up rather well. BTW, it is already illegal (or against one of the 3 letter agencies rules or something) to place an order or offer a stock that you have no intention on fulfilling at the time that you placed the order.

Quote:
Let's say that there is a buyer willing to buy 100,000 shares of BRCM with a limit price of $26.40. That is, the buyer will accept any price up to $26.40.
But the market at this particular moment in time is at $26.10, or thirty cents lower.
So the computers, having detected via their "flash orders" (which ought to be illegal) that there is a desire for Broadcom shares, start to issue tiny (typically 100 share lots) "immediate or cancel" orders - IOCs - to sell at $26.20. If that order is "eaten" the computer then issues an order at $26.25, then $26.30, then $26.35, then $26.40. When it tries $26.45 it gets no bite and the order is immediately canceled.
Now the flush of supply comes at, big coincidence, $26.39, and the claim is made that the market has become "more efficient."
Nonsense; there was no "real seller" at any of these prices! This pattern of offering was intended to do one and only one thing - manipulate the market by discovering what is supposed to be a hidden piece of information - the other side's limit price!
With normal order queues and flows the person with the limit order would see the offer at $26.20 and might drop his limit. But the computers are so fast that unless you own one of the same speed you have no chance to do this - your order is immediately "raped" at the full limit price! You got screwed, as the fill price is in fact 30 cents a share away from where the market actually is.
A couple of years ago if you entered a limit order for $26.40 with the market at $26.10 odds are excellent that most of your order would have filled down near where the market was when you entered the order - $26.10. Today, odds are excellent that most of your order will fill at $26.39, and the HFT firms will claim this is an "efficient market." The truth is that you got screwed for 29 cents per share which was quite literally stolen by the HFT firms that probed your book before you could detect the activity, determined your maximum price, and then sold to you as close to your maximum price as was possible.
Actually your example proves the exact opposite. If there actually was a market at the lower price, every single order from $26.10 up would have been filled by a seller's order since the HFT trade would have lacked time precedence. It's also complete speculation that absent HFT the complete order would have even gotten filled (especially if it was entered AON) much less at a price better than $26.40.
 
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Jhhnn

No Lifer
Nov 11, 1999
61,732
13,844
136
You are talking about the 1/10th of 1% that can afford to lose 100Mill. If that.
So what? I pulled that number out of thin air. The principle applies to all wealthy investors, who simply *do not* engage in the kind of behavior that might break them. Well, other than the very, very few who deserve to lose their asses from being quite so greedy.
 

Jhhnn

No Lifer
Nov 11, 1999
61,732
13,844
136
So if everytime you trade a treasury bond you had to pay .35% in tax what do you think this would do to interest rate on such bonds? What would this do to the liquidity in the bond market?

EDIT: sorry that was in reference to http://www.apttax.com/ he post in the previous post
That's an interesting question, but I doubt that the effects would be catastrophic. It's just something that investors would price into their calculations.

The problem with HST is that it further enables insiders to make & win short term bets, parasitizing long players' gains incrementally over time. Small investors & institutional investors couldn't move fast enough to keep up with the big boys before HST, and now their chances are even less. Plucking the pigeons is something best done with some subtlety & restraint, and letting your algos do it for you isn't that, at all.
 

nehalem256

Lifer
Apr 13, 2012
15,670
6
0
That's an interesting question, but I doubt that the effects would be catastrophic. It's just something that investors would price into their calculations.
Oh I do not doubt they would price it into their calculations. Lets say that an investor wants to trade a 10 year treasury once per quarter. That would be a tax of 1.4%

Looking up the current yield for the 10 year treasury it is 1.56%. So to offset the tax investors will have to almost double the yield of treasuries.
 

Jhhnn

No Lifer
Nov 11, 1999
61,732
13,844
136
Oh I do not doubt they would price it into their calculations. Lets say that an investor wants to trade a 10 year treasury once per quarter. That would be a tax of 1.4%

Looking up the current yield for the 10 year treasury it is 1.56%. So to offset the tax investors will have to almost double the yield of treasuries.
Let's propose a totally illogical scenario... extrapolate from there...
 

nehalem256

Lifer
Apr 13, 2012
15,670
6
0
Let's propose a totally illogical scenario... extrapolate from there...
Right. Im sure that it would be traded much more often than twice a year. Driving the rate even higher than I predicted.

Or maybe it would just completely destroy the liquidity of the treasury market... which would also drive the rate much higher.
 

Smoblikat

Diamond Member
Nov 19, 2011
5,185
107
106
What effect would this have on penny stocks/day traders? If they were taxed on every transaction they did there would be no incentive for the little guy to enter the stock market.
 

JACKHAMMER

Platinum Member
Oct 9, 1999
2,870
0
76
What effect would this have on penny stocks/day traders? If they were taxed on every transaction they did there would be no incentive for the little guy to enter the stock market.
The little guy is not a day trader, not even close. The little guy's best chance is long term investments, as almost every financial planner will tell you. This proposed tax would not do anything to the typical investor.
 

lotus503

Diamond Member
Feb 12, 2005
6,502
1
76
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.
Umm no they don't, he'll the sec doesn't monitor and there is no paper trail for HFT, SEC is also underfunded and doesn't have the resources to track HFT.
 

lotus503

Diamond Member
Feb 12, 2005
6,502
1
76
What effect would this have on penny stocks/day traders? If they were taxed on every transaction they did there would be no incentive for the little guy to enter the stock market.
None, a penny per transaction tax would only affect HFT.
 

Jhhnn

No Lifer
Nov 11, 1999
61,732
13,844
136
Right. Im sure that it would be traded much more often than twice a year. Driving the rate even higher than I predicted.

Or maybe it would just completely destroy the liquidity of the treasury market... which would also drive the rate much higher.
You fail to explain why anybody would trade 10 year treasuries quarterly, or how they gain from it.
 

OneOfTheseDays

Diamond Member
Jan 15, 2000
7,052
0
0
The financial services industry needs to be gutted and regulated to all hell. These people have shown time and time again that they are unbelievably reckless and cannot be trusted.

The last thing we need is less regulations here. We need a whole LOT more and we need to dissuade people from simply throwing around other people's money without any care in the world.
 

DucatiMonster696

Diamond Member
Aug 13, 2009
4,269
1
71
Bullshit. There are plenty of working class folks who risk their lives or health everyday for their paycheck.One wrong move and its slipped disc or mangled limb. That's risk, not betting a portion of your trust fund.
The risk I'm talking about has absolutely nothing to do with the physical nature or physical dangers of a 9/5 job vs that of an investor pouring thousands, millions or billions of dollars of their money or that of other investors into a risky investments.What I mentioned in terms of "risk" has everything to do with the greater financial stability of someone earning a 9/5 income which is not privy to the turbulent nature often associated with investment markets which includes their rapid upswings and downturns which can create or wipe out fortunes over night.

This basically means that when investors pour money into a capital investment with a high rate of return they often do so at the risk and expense of a higher then average rate of failure which they must accurately asses if they want to be on the winning side of any investment. Which is why investments should not be treated the same as regular income because investments carry more financial risk. If you start to impose higher taxes on investments then you will essentially nullify any potential gains by investors on riskier financial ventures and you will end up killing future nascent growth in the economy as investors will surely and steadily weed out and avoid all future investments that have a higher risk to reward ratio after you have raised taxes on investments.
 

DucatiMonster696

Diamond Member
Aug 13, 2009
4,269
1
71
The financial services industry needs to be gutted and regulated to all hell. These people have shown time and time again that they are unbelievably reckless and cannot be trusted.

The last thing we need is less regulations here. We need a whole LOT more and we need to dissuade people from simply throwing around other people's money without any care in the world.
What they need is to be allowed to fail and not bailed out. More regulations would only serve to make it easier for larger firms to rig the system and reap the rewards without fear of failure.
 

JACKHAMMER

Platinum Member
Oct 9, 1999
2,870
0
76
The risk I'm talking about has absolutely nothing to do with the physical nature or physical dangers of a 9/5 job vs that of an investor pouring thousands, millions or billions of dollars of their money or that of other investors into a risky investments.What I mentioned in terms of "risk" has everything to do with the greater financial stability of someone earning a 9/5 income which is not privy to the turbulent nature often associated with investment markets which includes their rapid upswings and downturns which can create or wipe out fortunes over night.

This basically means that when investors pour money into a capital investment with a high rate of return they often do so at the risk and expense of a higher then average rate of failure which they must accurately asses if they want to be on the winning side of any investment. Which is why investments should not be treated the same as regular income because investments carry more financial risk. If you start to impose higher taxes on investments then you will essentially nullify any potential gains by investors on riskier financial ventures and you will end up killing future nascent growth in the economy as investors will surely and steadily weed out and avoid all future investments that have a higher risk to reward ratio after you have raised taxes on investments.
I understood what you meant, but I disagree. You make it sound like someone who is employed is guaranteed that income without risk, and certainly that is not true for many jobs. The investor class should be diversified enough to shelter themselves from the downswings in the market. If they are not, that is their problem and poor decision making - not mine, nor the governments - I see no reason that the middle should subsidize their risk by paying a higher tax rate.

As far as creating funding problems in the capital market I see two problems with your thesis. First, historic capital gain rates where higher, and as far as I know there was not a dearth of capital investment, rather the opposite - history is not on your side. Second, and I am going to repeat my self - high risk investment should not be given any favorable tax position as you suggest. People will invest if the upside is high enough.
 

glenn1

Lifer
Sep 6, 2000
25,388
1,013
126
The financial services industry needs to be gutted and regulated to all hell. These people have shown time and time again that they are unbelievably reckless and cannot be trusted.

The last thing we need is less regulations here. We need a whole LOT more and we need to dissuade people from simply throwing around other people's money without any care in the world.
Ummmm... financial services is one of the most regulated industries out there, probably only behind aviation.
 

piasabird

Lifer
Feb 6, 2002
17,183
60
91
Well billions of shares of stock are sold every day, maybe not quite that many, but it is hard to say right off the top of my head. I think a transaction tax could generate quite a bit of money. It would generate more money than the presidents idea of taxing the rich more. I think it has some real possibilities. I dont think we should try to have a transaction fee for just everyday withdraws from banks. I think the better idea is to tax the transactions of traders and investment firms. Punishing the average joe is not a very good idea. Real traders that buy and sell stock will not be hurt much at all. The thing is there are so many transactions every day it will add up taxwise, and it might slow them down if they have to pay for it. Even if it is $0.10 for every trade it will make a difference.

For instance today the volume of stock traded was 1,899,240,000 How many individual transaction per day is hard to say. Sometimes the volume is around 3 or 4 billion. This is only the volume on the NASDAQ.

On the DOW the Average daily volume (3 months) 129,245,857 per day.
 
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Jhhnn

No Lifer
Nov 11, 1999
61,732
13,844
136
I dont think we should try to have a transaction fee for just everyday withdraws from banks.
Bank withdrawals aren't transactions- it's the depositors money in the first place. Buying something with the money is a transaction.
 

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