Can a /biz/nessman explain to me how Bernie Sander's proposed 50¢ tax on stock transactions would affect the American economy? Specifically, how such a small amount would become significant enough to drive away investment.
High frequency trading stabilizes prices and adds liquidity to the market, there is literally nothing wrong with it. Suppressing it will only hurt the economy making it more difficult for good wholesome salt of the earth hard working Americans to save and put money into pensions, college funds and invest a little into the American dream. Bernie Sanders is a godless commie and this is just his way of making everyone a little more dependent on the state, which is apparently the basis for his "democratic socialist" utopia.
You are one dumb nigger. High frequency trading injects needed liquidity. Just wait until Bernie implements this and you can't sell your shitty penny stocks anymore.
>b-but muh liquidity!!!
Cry me a river, faggot. All it does is hurt cancerous speculators like you.
the basic gist of it is that our economic system is theoretical. And it makes certain assumptions that the real world cannot always abide by
in theory the market prices of securities will reflect their value. In practice there may be circumstances that (due to some for of inefficiency, for instance: asymmetrical information between two trading parties) cause pricing 'bugs' where the price of the security does not match its value.
If someone were to capitalize on this, they would stand to achieve near risk-less gain. (for instance fractions of a penny differences in pricing over an arbitrary amount of trades would yield significant profit.
So, from an outside perspective, it would seem that someone had simply bought and sold a bunch of securities rapidly and made "free" money from doing nothing. But actually such activity is good for all traders as a whole, because these inefficiencies are not conducive to a healthy market. arbitrage actors to capitalize on these discrepancies as soon as they are found. And thus the market evolved its own natural response to a fairly unsolvable problem.
Its kinda like a human body scabbing over a cut.
Sure it looks gross, and feels weird. but its actually better than the alternative: allowing an open wound to potentially fester and get worse
>High frequency trading stabilizes
You can't be serious.
It's pretty simple.
The plan is to tax the value (not profit) of every trade half a cent every dollar, both on the buy and the sell.
So, you buy $10,000 worth of stock and then sell it, you'd be taxed $100 ($50 each way). That's even if you break even or lose on the trade.
It probably goes without saying that no traders would play by these rules, so if it ever passed, we'd end up with some screwy system like the UK, where people trade CFD's instead of stock in order to dodge taxes.
This idea actually initiated in 1972 as the "Tobin tax", after the Nobel prize who first enunciated the idea of taxing financial flows.
Of course, a whole lot of people hate the idea. But if one claims than financial trading creates value in an economy, then taxing it is just a matter of common sense. Economical activities are taxed, that's how nations finance themselves, Economics101. Of course there would be loopholes, but even so, it would generate tremendous revenue.
Average daily trade volume in US equities markets is ~9 billion shares.
Including that he would almost assuredly want to tax all activity in futures and options as well would probably bring it closer to ~12 billion transactions per day on average.
That's 6 billion dollars in cost-added-only fees daily, or about 1.5 trillion in annual cost.
Additionally a flat 50 cent tax would adversely affect small stocks, so every company would seek to reverse split to reduce the transaction cost, and make their shares too expensive for median income individual investors, forcing them to seek out funds which add additional costs.
Long story short: the markets would move out of the country and the ability to raise capital would be severely impaired, and we'd get to know what it's like to be eastern europe.
The value of arbitrage is all about time scale. Regular markets produce a representative picture of the value of assets via arbitrage, which is a valuable service. The thing is that on the 10 millisecond time scale and hundredths of a cent that hft operates on, there is little to no value in that arbitrage to the larger market. It just pulls out money from the market little by little. That money comes largely from investors like us who don't have the resources to do the same thing.
You'll find stocks sometimes whose graphs look like square waves on the minute scale. That's because there are hft bots fighting a battle and that stock just happens to be the battleground. It doesn't do anything but destabilize the stock for real investors and sap a few cents out of them every time they trade the stock by jacking up the price right before the order goes through and then selling again
I see like most of Sanders' ideas, this one's controversial. I'll take a swing at it.
What this will do is make it costly to engage in speculative stock trading without impacting investment stock trading. If you're buying shares in apple because you think it's a great company that will do well in the future, 50 cents extra to buy the shares won't dissuade you. If you're buying it because you think it will be worth more by the end of the day, 50 cents might make it less worth your while. If you're buying it because you think it will be worth more a few seconds from now, 50 cents will almost definitely make it not worth your while.
I'd be for it because I think high frequency trading (which often takes place several times a second) doesn't do much beyond further concentrating wealth. liquidity might suffer, but volatility would probably also be reduced.
TL;DR: Investors won't be affected, but speculators will.
>DEFINITION of 'Front Running'
>The unethical practice of a broker trading an equity based on information from the analyst department before his or her clients have been given the information.
explain to me where hft does this
Like any other tax increase. People move elsewhere. Happened in states when they added online poker restrictions. The pros who were making real money simply moved to canada etc. It's really easy. It's his economy's loss.
Taxes drive wealth away. Look at france. It's a mess as all the wealth flees like hell. Politicans dont understand it's free market. Money and people will move to better conditions. Usa has been a good place as they had lower taxes than europe, attracting european talent and companies to move abroad.
50cents is so little it's just a hft tax basically. I guess sanders dont like hft. That's fine, but he will never beat the banks in any game, he should know.
It's not "50 cents".
It's .5% of the value of the entire trade, making it potentially unlimited.
Can't argue with that. I have two kids and no need to work. Currently, I pay thousands annually to my broker for margin interest and commissions due to trading activity. This is in addition to thousands in tax to the Feds and state.
I would have pretty much zero reason to keep trading if this were to pass, and so I wouldn't.
Kind of goes against the idea of creating additional revenue, but whatever.
ohh it's 50cents for 100usd? LOL ok that wont work
cfds you will pay capital gains tax normally. losses you can deduct of your income, that's handy. spread betting you avoid taxes.
btw cfds are banned in states (LOL??) what the fuck
>everyone so fucking buttfrustrated about Wall Street
Current downturn aside, the market is quite honestly soaring and I suspect you're mad because you're either too stupid to understand it, or too poor to invest.
>cfds you will pay capital gains tax normally
Right, but if you traded equities you'd get fucked on Stamp Duty.
From what I understand, that's half of what Sanders wants here - your .5% (SDRT) is only on the buy, not the sale.