I actually like this plan and wish Trump had done it - although I doubt it goes anywhere with the Democrats either.
With high-speed trading, they write computer programs that are actually able to see trades moving towards the markets. The programs get ahead of the trades, and they skim off of the trades.
For example, if a buy-order for 1Million shares of GM was just launched, the High Speed trading programs will go in and buy GM before the the 1M buy order makes it to the NYSE (we’re talking a handful of milliseconds here), and then the 1M buy order makes it to market, GM goes up slightly, and the High Speed trading program promptly sells GM.
Other than making a relative handful of people very rich (at the expense of others), they serve NO VALUE to this country.
But it taxes all transactions. Not surprised you like it.
The high frequency skim is a fraction of what brokers used to charge. Limit your trading, and it will cost you hardly anything at all.
It has increased the value of firms having clients that trade. Tell the clients how smart they are, promise high returns from day and option trading. And then they’ll churn their own accounts. The HFTs take their scrape, and kick back to the brokers.
One big happy family!
I don’t trust this scheme, it would be more reassuring to legislate microtransactions out of business directly rather than pretending to do so and then tout all the money that doing so would raise. Just like the cigarette sin taxes, they promise all this money is going to be raised, but simultaneously insist that people targeted by the tax would change their behavior and avoid the conditions that would encounter the tax.
We already have long term stock sales and short term sales, the latter being penalized.
>>For example, if a buy-order for 1Million shares of GM was just launched, the High Speed trading programs will go in and buy GM before the the 1M buy order makes it to the NYSE (we’re talking a handful of milliseconds here), and then the 1M buy order makes it to market, GM goes up slightly, and the High Speed trading program promptly sells GM.
Ummm.. No. Only a fool would dump a 1,000,000 share market order directly on the market. The quantities on the BBO for GM as I type this are on the order of 3,000 shares, so an 1M share order would spike the market. A large institutional order like that would get broken up algorithmically by the brokers to hide the demand. HSTs have found ways of hunting elephants by detecting that liquidity pool, sure, but that’s hardly the same as “seeing trades moving towards the market” and taking unfair advantage.
I prefer transaction tax over capital gains tax.
This is just the beginning. 2021 will see a flurry of tax increases as a prelude to the big heist: a raid on people’s 401K accounts. The impact on the U.S. economy will be devastating.
There is a book out that basically claims that a difference of a few miles of fiber optic cable can give traders an advantage—and we’re talking the speed of light here. That’s how fast the trades are happening.
For which the tax changes nothing. In my non professional opinion you’re talking about front running which has been illegal for decades. Yes, milliseconds, but frontrunning. On proprietary information. Should be an enforcement issue, and I agree it would have been nice if President Trump had addressed it.
If I step back and look at this from 100 yards it looks (and acts) just like a small tax on large transactions. Of course the RATs hate the idea that anyone else could possibly impose a tax on anything, so their answer is to impose another tax that they collect.