Robin Hood tax on trades, Retarded idea

[Hugo Drax]

http://www.cnbc.com/id/45580928


This is another dumb idea that will just hurt the 99% of Americans. And of Course the Billionaires are pushing for it.

Here is why this is stupid.

This tiny tax on transactions will be passed down to 401K investors. Here is what will happen, those penny BID/ASK spreads will widen back to 1970s spreads, wide as a truck. MMs will cash in on the spread and pass the tax down to the investor.

Now you have a 401K Mutual fund, guess what the trades that occur on that fund will now have to pay a tax, so you pay the tax. In addition Anytime someone redeems that fund, you pay the tax.

You will pay taxes up the ass on your 401K and the lower levels of liquidity and wider spreads means you get reamed on the execution as well.

Now the MMs will be fine, Wallstreet will be Fine, Billionaires will be fine but Joe Six pack will get reamed without the courtesy of a reach around.

Good going there if this tax comes.

It wont affect me though, I will just price it in on the options contracts I sell.

 

[JS80]

I hope it passes. Stupid Americans deserve to get anal raped and another 4 years of suffering under Obama.

 

[Craig234]

It wont affect me though, I will just price it in on the options contracts I sell.

So you are selling them for less than you can get currently?

Not a very good plan. Commie.

 

[the DRIZZLE]

I'm on the fence about this proposal but it will have virtually effect on the middle class, especially if they keep to fraction of a cent. High frequency trading and non-frequency hedge funds account for 56% and 15% of market volume respectively. A .1 cent tax will have very little effect on mutual fund costs. The spreads won't be anywhere near the 1970's because of computerization and deregulation has significantly reduced costs.

 

[Hugo Drax]

So you are selling them for less than you can get currently?

Not a very good plan. Commie.

I do not expect you to understand the basics of options pricing. But when the tax gets put into effect, options MMs will just rachet up IV and price it in accordingly.

That means your union pension fund will have to pay up the ass to hedge risk, in addition to paying up the ass in taxes for every transaction and poor price execution once the spreads widen due to lower liquidity.

Your gonna get the short end of the stick, everyone who is involved in the industry will just pass the cost down to you in more ways then one.

 

[Hugo Drax]

I'm on the fence about this proposal but it will have virtually effect on the middle class, especially if they keep to fraction of a cent. High frequency trading and non-frequency hedge funds account for 56% and 15% of market volume respectively. A .1 cent tax will have very little effect on mutual fund costs. The spreads won't be anywhere near the 1970's because of computerization and deregulation has significantly reduced costs.

Spreads will widen to take into consideration the cost of this tax and it will be 100% passed down to the middle class.

So SPY instead of trading 125.85/125.86 will trade 125.80/125.86

Market Makers are not going to eat the cost of this tax. You will.

Billionaires wont either, thats why they are supporting this.

 

[EagleKeeper]

http://www.cnbc.com/id/45580928


This is another dumb idea that will just hurt the 99% of Americans. And of Course the Billionaires are pushing for it.

Here is why this is stupid.

This tiny tax on transactions will be passed down to 401K investors. Here is what will happen, those penny BID/ASK spreads will widen back to 1970s spreads, wide as a truck. MMs will cash in on the spread and pass the tax down to the investor.

Now you have a 401K Mutual fund, guess what the trades that occur on that fund will now have to pay a tax, so you pay the tax. In addition Anytime someone redeems that fund, you pay the tax.

You will pay taxes up the ass on your 401K and the lower levels of liquidity and wider spreads means you get reamed on the execution as well.

Now the MMs will be fine, Wallstreet will be Fine, Billionaires will be fine but Joe Six pack will get reamed without the courtesy of a reach around.

Good going there if this tax comes.

It wont affect me though, I will just price it in on the options contracts I sell.

Questions regarding your rant.

This is another dumb idea that will just hurt the 99% of Americans

99% of the Americans are tuned in to the stock market?😕
Actively or via their pension/401K/IRA.
I would think that tat number is lower.

Now you have a 401K Mutual fund, guess what the trades that occur on that fund will now have to pay a tax, so you pay the tax. In addition Anytime someone redeems that fund, you pay the tax.

Tax is paid on the redemption done at the request of the participant. the fee is then charged against the recipient - just like a normal stock brokerage fee.

Mutual funds have a separate tax that is already paid/charged to each participant based on the value changes of the fund. The value benefits all participants; sales charges are accounted for w/ respect to the value. So now the transactions fee is split based on the increase of your value.

You will pay taxes up the ass on your 401K and the lower levels of liquidity and wider spreads means you get reamed on the execution as well.

You pay the taxes upfront or at the end based on your preferred method of trading - it becomes built into the system. That small amount of tax $10 per $10K is not going to have a major effect on liquidity for the individual.

For the institution; it is still a minor bump per each transaction; but it if forces some responsibility into the system,such as cutting back the churning, it will be worth it.

The amount it hits Joe Sixpack will be negligible. Fees for processing $10K worth of trades are much more than the extra fee would be. It actually may force more stability into the market and stop people from trading out for a $1 profit on a $100 trade. They will need to think on the value of their money

 

[EagleKeeper]

Spreads will widen to take into consideration the cost of this tax and it will be 100% passed down to the middle class.

So SPY instead of trading 125.85/125.86 will trade 125.80/125.86

Market Makers are not going to eat the cost of this tax. You will.

Billionaires wont either, thats why they are supporting this.

why will the billionaires not get hit. someone will have to cover what they are selling/buying.

Or will there be a special category?

 

[Spikesoldier]

the 1%'ers don't flinch at all because: why care when youre making ridiculous amounts of money insider trading anyway? the impact to them will be peanuts.

1%'ers: YES YES YES ram it down their throats! its good medicine for everyone, that everyone needs!

 

[xBiffx]

I hope it passes. Stupid Americans deserve to get anal raped and another 4 years of suffering under Obama.

Not sure that I agree that we deserve it, but some might require it in order to realize their assholes are being marauded. Being stupid isn't always a choice. Some people are just dumb by nature. Ignoring or disregarding reality when you have been shown otherwise, now that's your own damn fault.

 

[the DRIZZLE]

Spreads will widen to take into consideration the cost of this tax and it will be 100% passed down to the middle class.

So SPY instead of trading 125.85/125.86 will trade 125.80/125.86

Market Makers are not going to eat the cost of this tax. You will.

Billionaires wont either, thats why they are supporting this.

No they won't. Brokers commisions alone were around 1% in the 1970s, this isn't anywhere close to that. The majority of the trading is done by hedge funds (the wealthy) and the big banks so they will bear the majority of the cost.

This post discusses the historical level of frictions in the market. A 0.1% tax is pretty small compared the frictions back in the day.

http://www.cxoadvisory.com/5737/big-ideas/trading-frictions-over-the-long-run/


I'm not even saying that I support this, but what you are posting is FUD.

 

[JS80]

why will the billionaires not get hit. someone will have to cover what they are selling/buying.

Or will there be a special category?

Fees + spreads go up to make up for increased costs, which means the rest of us pay for it.

 

[Genx87]

The Obama administration has also been lukewarm, expressing sympathy but saying it would be hard to execute, could drive trading overseas and would hurt pension funds and individual investors in addition to banks.

If this admin believes the above. Then it has to hurt worse than they are claiming.

 

[Hugo Drax]

why will the billionaires not get hit. someone will have to cover what they are selling/buying.

Or will there be a special category?

They will hedge away the cost via some special OTC structured product that trades away from the exchanges and will fall under some special loophole. And like I said, Wallstreet and Banks will pass down the cost to you as well.

This tax is the equivalent of dropping chaff against a incoming progressive tax missile.

They will push for this, the media will push for this transaction tax and sell the sheep on this tax on the "Rich".

Billionaires do not want to pay 1960s progressive tax levels (Look at the tax tables for 1960 if you want to see what I mean). So they keep the low taxes they pay today, drop this "Tax countermeasure on the sheep" via this idiotic Transaction tax, the 99%ers sheep get shafted again and of course the 1% continue on thier merry way, avoiding getting hit by the taxman.

 

[the DRIZZLE]

They will hedge away the cost via some special OTC structured product that trades away from the exchanges and will fall under some special loophole. And like I said, Wallstreet and Banks will pass down the cost to you as well.

This tax is the equivalent of dropping chaff against a incoming progressive tax missile.

They will push for this, the media will push for this transaction tax and sell the sheep on this tax on the "Rich".

Billionaires do not want to pay 1960s progressive tax levels (Look at the tax tables for 1960 if you want to see what I mean). So they keep the low taxes they pay today, drop this "Tax countermeasure on the sheep" via this idiotic Transaction tax, the 99%ers sheep get shafted again and of course the 1% continue on thier merry way, avoiding getting hit by the taxman.

I'm skeptical that they are going to be able to move 2/3 of the market volume OTC and outside the scope of this tax.

 

[Dman8777]

If it gets rid of high-frequency trading, it's worth it. There's nothing going in Wallstreet more contrary to the common good than that garbage.

 

[Hugo Drax]

I'm skeptical that they are going to be able to move 2/3 of the market volume OTC and outside the scope of this tax.

Where did I say they wre going to move 2/3 of the market OTC?

You are confusing a specialty structured OTC investment instrument composed of derivatives etc. used for eroding away the cost of taxes paid on equity trading.


Two different animals. Nowhere did I say the regular equity markets will go OTC.

 

[Thump553]

99% of us are not day traders. The effect will be below trivial for us.

 

[EagleKeeper]

Fees + spreads go up to make up for increased costs, which means the rest of us pay for it.

It is not the broker that is paying for this, but the buyer and/or seller.

you make the transaction knowing that you have the fee coming; just like any sale.
The difference that this is a percentage of the sale rather than a fixed fee to the broker.

 

[momeNt]

If it gets rid of high-frequency trading, it's worth it. There's nothing going in Wallstreet more contrary to the common good than that garbage.

It won't remove any of the harmful factors of HFT, where no transactions are even made and bids and asks are removed nearly instantly and only serve to manipulate the spread.

The only way to truly remove the harmful HFT would be to enact a minimum latency requirement where bids and asks are retained for a minimum amount of time, also this would stop any order read algorithms which run from bids that seemingly cover but aren't able to execute.

Google quote stuffing and you'll see how a financial TRANSACTION tax doesn't rid us of HFT.

 

[JS80]

If it gets rid of high-frequency trading, it's worth it. There's nothing going in Wallstreet more contrary to the common good than that garbage.

Do you know how much liquidity the HFT boxes create?

 

[cybrsage]

the 1%'ers don't flinch at all because: why care when youre making ridiculous amounts of money insider trading anyway? the impact to them will be peanuts.

1%'ers: YES YES YES ram it down their throats! its good medicine for everyone, that everyone needs!

 

[EagleKeeper]

How can a HFT not have a transaction. 😕

Ownership is being changed.

 

[Darwin333]

It won't remove any of the harmful factors of HFT, where no transactions are even made and bids and asks are removed nearly instantly and only serve to manipulate the spread.

The only way to truly remove the harmful HFT would be to enact a minimum latency requirement where bids and asks are retained for a minimum amount of time, also this would stop any order read algorithms which run from bids that seemingly cover but aren't able to execute.

Google quote stuffing and you'll see how a financial TRANSACTION tax doesn't rid us of HFT.

Another good way would be to charge a very small fee for all bids/asks that are canceled. Say a penny each. You could even give people X amount a day/month/year whatever that is tax free so that normal traders aren't being hit (even though we are talking about a rather small amount for non HFT).

Or we could simply say that offering to buy or sell something at a price that you have no intention on doing so in order to scam the other party out of a little bit more is fraud.

Neither will happen though, they are all in bed with each other.

 

[Darwin333]

How can a HFT not have a transaction. 😕

Ownership is being changed.

They offer and cancel thousands of bids in milliseconds in order to find out the maximum price you (the market in general) are willing to pay for the stock. This results in you paying a nickel or two more per share then you otherwise would have, no big deal right? Now think about being able to scam a nickel or two off of a very large portion of all shares traded, now we are talking major money.

It was July 15, and Intel, the computer chip giant, had reporting robust earnings the night before. Some investors, smelling opportunity, set out to buy shares in the semiconductor company Broadcom. (Their activities were described by an investor at a major Wall Street firm who spoke on the condition of anonymity to protect his job.) The slower traders faced a quandary: If they sought to buy a large number of shares at once, they would tip their hand and risk driving up Broadcom’s price. So, as is often the case on Wall Street, they divided their orders into dozens of small batches, hoping to cover their tracks. One second after the market opened, shares of Broadcom started changing hands at $26.20.

The slower traders began issuing buy orders. But rather than being shown to all potential sellers at the same time, some of those orders were most likely routed to a collection of high-frequency traders for just 30 milliseconds — 0.03 seconds — in what are known as flash orders. While markets are supposed to ensure transparency by showing orders to everyone simultaneously, a loophole in regulations allows marketplaces like Nasdaq to show traders some orders ahead of everyone else in exchange for a fee.

In less than half a second, high-frequency traders gained a valuable insight: the hunger for Broadcom was growing. Their computers began buying up Broadcom shares and then reselling them to the slower investors at higher prices. The overall price of Broadcom began to rise.

Soon, thousands of orders began flooding the markets as high-frequency software went into high gear. Automatic programs began issuing and canceling tiny orders within milliseconds to determine how much the slower traders were willing to pay. The high-frequency computers quickly determined that some investors’ upper limit was $26.40. The price shot to $26.39, and high-frequency programs began offering to sell hundreds of thousands of shares

http://www.nytimes.com/2009/07/24/business/24trading.html?_r=2&ref=business