Quote from: AyeYo on July 08, 2011, 08:40:23 PM

Quote from: niemivh on July 08, 2011, 06:40:01 PM

If you think traders that are seeking to make speculative profits would be 'demolished' paying a 1% tax I guess that's your interest to uphold. Not to make this about me, but just for an example, I pay more than 25% of my income in taxes, a large amount in property taxes and others. Most people pay sales taxes on everything they buy, but if those who's 'work' consists of buying and selling scrips of paper that represent other peoples work, ideas and productive capacity can't afford to pay a scant 1%, I understand. It is a 'free market' we are trying to uphold here. I guess they will pay when they pay that 15% capital gains that they are working so hard to eliminate. What you say? Deferred taxation on earnings? Never heard of it.

That's just it though, it's not a 1% tax. It's a 1% tax on EVERY trade, that's a 2% tax round trip. That means I'd be paying $2,000 round trip for each standard lot ($100,000) FX trade. Think about that for a second... $2,000. That means I would need a many sigma event of a 200 pip move JUST TO BREAK EVEN.

And that's just ONE trade. I average over 100 trades per month, so that's over $200,000 PER MONTH in taxes. You can't be serious if you think that doesn't totally shut down retail trading.

In order for anyone to actually trade with that kind of tax, we'd have to have little to no leverage. So instead of being able to comfortably trade standard lots with a $50,000 account, traders would need more like $2,500,000, and that tax would still be crippling. That's not money normal people can come up with, so it DOES wipe retail people out of trading, leaving only the mega money (the banks) to trade.

So now you've got a market with ONLY banks trading and any normal Joes actually in the market are buy and holders... who are now being crushed even easier by the banks because the banks are the only ones moving the market.

One of the primary purposes is to shut down the existence of HFT as we have established that it is parasitical - at least, my arguments as to why it is parasitical have yet to be countered based on anything derived from the tangible universe in which we live, but I eagerly await any angle on this which I have yet to consider. There are a few ways I interpret the latter part of your post: that the big HFT banks would be able to continue with HFT? Or that big non-HFT operations would simply squeeze the little guys out of the market?

If your business model is to make short-term trades all day this obviously would adversely affect your bottom line to a degree. But it's hard to say how much as the exchange markets would look significantly different. Estimates put the total amount of trade volume due to HFT at upwards of 70-80%, and that number is climbing. To what we've already discussed through HFT you are affectively paying more at the exchange than you would otherwise be if HFT wasn't allowed. So it does require a bit of imagination to see if this would be in your personal, short-term best interest which seems to be all that most consider. Most the large banks are that you are probably worried about are insolvent and need to be liquidated in Chapter 7 bankruptcy, so I don't know to which 'big banks' you'd be speaking of that (in my perfect world) would be allowed to survive as is.

Another purpose is to raise revenue from the financial sector which has been having windfall year after windfall year and yet another reason is to drain the speculative swamp that is the financial markets. Too much money is sloshing around the currency markets for certain, and I'd rather have a 1% Tobin Tax on this flow than capital controls which will probably be here soon anyway.

It may be the case that even after HFT was effectively stopped that this 1% tax would not be in your best interest, and that's your position to uphold. My desire through this tax is to prevent the national bankruptcy of the USA and the return to a real economy, not our spectral apparition of an economy that has and can only continue to exist through our world reserve currency status. I fear that when that this rug is pulled out from under us it will result in a crushing level of poverty for the vast majority of US citizens (and the world) and/or World War III. That's what I wish to avoid, but if your own personal self interest seems to outweigh this outcome, then by all means propose a better program to head off the coming crisis.