the end of Day-Trading ?

rathcoole_exile

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Get taxed whether you win or LOSE ?

On Friday, February 13, your colleague, U.S. Congressman Peter DeFazio, introduced H.R. 1068: “Let Wall Street Pay for Wall Street's Bailout Act of 2009”, which aims to impose a 0.25% transaction tax on the “sale and purchase of financial instruments such as stock, options, and futures.” Without a doubt, many Americans are appalled at the reckless behavior of large Wall Street companies, and the notion of making those who are responsible for putting the global financial system in jeopardy help repay taxpayers for bailing them out is certainly justifiable.

Unfortunately, I feel that this proposal is the wrong way to do that, as this tax applies to all investors, the vast majority of whom have done no wrong. Effectively, this tax will punish anyone who wants to save their money, whether it be by investing in stocks or options directly, putting their hard earned money in any mutual fund, or by simply placing a portion of their paycheck in a 401K. There’s no doubt that banks and mutual funds will pass along this added cost to their customers, giving this proposed tax a much further reach than was initially imagined.

Moreover, the unintended consequences associated with H.R. 1068 are also hard to ignore.

First, many hard-working Americans make their livings by running small businesses that trade stocks, options and other financial instruments. Many of whom will be put out of business due to the fact that their margins are often quite thin. In addition, those who work for or with these individuals will also lose their jobs.

Second, a transfer tax such as this will lower capital gains dollar for dollar, making the notion that anyone who invests their money will be on the hook for the excesses of Wall Street all that more poignant.

Finally, such a tax will undoubtedly affect the number of shares traded on an absolute basis, thus reducing liquidity – a necessary ingredient in the effective pricing of assets. It’s the complete lack of liquidity, for example, which made collateralized mortgage obligations effectively worthless.

The body of the bill suggests that such a tax would have a negligible impact on the average investor. I beg to differ. For example, a $10,000 trade (or approximately 100 shares of stock in Apple, Inc.) would increase the cost of a round trip transaction by $50. 100 shares is generally considered to be a minimum size for a trade, which would devastate any small business executing even a handful of similar trades each day.

As you can see, while this bill may sound good on the surface, the effects, if it is passed, will reach anyone who wants to invest their money and will ruin many small business people who are not at fault for this distressing situation all Americans are struggling through.

I urge you to vote NO on H.R.1068

Tell Congress to Block the Trader Tax | NA | NA
 
Not sure if this tax would apply to non-US traders, but the drop in liquidity would sure hurt all daytraders. All of a sudden spread-betting looks like a good deal. But probably the spreads will increase to cover the tax. This tax is definitely not a win-win situation.

Funny how little response to this post there is R_E, it looks like it can be a major issue. Some more views on this:

GreenTrader Weblog
 
Not sure if this tax would apply to non-US traders, but the drop in liquidity would sure hurt all daytraders. All of a sudden spread-betting looks like a good deal. But probably the spreads will increase to cover the tax. This tax is definitely not a win-win situation.

Funny how little response to this post there is R_E, it looks like it can be a major issue. Some more views on this:

GreenTrader Weblog

.25% is a fairly big chunk of change.

Swing trading it is then...

When decimalisation kicked in - it tightened the spreads on stocks and without doubt it was the single biggest contributor to market manipulation ever. Up a penny, down a penny is a lot cheaper to achieve than up a sixteenth, down an sixteenth.

Depending on how this is implemented, it may not necessarily make things harder for traders but it would be a different game. Program trades that pull the market down with small orders to push in a larger order will be made redundant.

So - whilst this is not a reversal of decimalisation, it may amount to markets working in a similar fashion to pre-decimalisation days.

That's where I'd be looking if this took off - this fee carries the same impact as a much larger spread from the traders perspective as in the days before decimalisation.

Saying that - I don't see it happening. If it does, trading may actually become easier.
 
AFL-CIO Defazio Transaction Tax

This site has some important details on the Transaction Tax and what to do to prevent it from passing into legislation.

AFL-CIO lends support to a dreaded financial-transaction tax - GreenTrader Weblog

The information from a discussion on the transaction tax is available from a podcast through this link:

http://www.greencompany.com/EducationCenter/ConfCall/GreenTraderTaxConfCall090309.mp3

This is going to a fight. Information for the bill - H.R. 3379 and for H.R. 1068 can be found here: THOMAS (Library of Congress) by selecting 'Bill Number' and including H.R. in search.
 
Information Related to the Transaction Tax

Not sure how exactly it hits daytrading and not other trading options?

What this tax would do is impose a fee on each transaction. For an individual engaged in Active Trading making 200 to 500 trades a year this could amount to fees in the thousands. What the proposal supporters don't realize is that once a tax such as this is imposed it will dry up volume to the point where no taxation can occur forcing politician find another source to tax. In addition volume will find another exchange to trade on making what ever commodity or instrument being traded leave the control of the jurisdiction of the nation or exchange where it once traded. This can be observed with the level of trading volume that left New York for London after Sarbanes Oxley and Reg FD was enacted. No of which did anything to prevent the crisis from a year ago.

To find more information on preventing detrimental taxation visit http://www.greencompany.com/EducationCenter/InteractiveOnlineMeetings.shtml[/url]

These conference calls are scheduled on a regular basis. There is a written description corresponding to the sections of the recording that provide navigation to each subject with the call.

Other calls are archived and continuously provide information related to trading. The calls take place 2 or 3 times each month.

Joining the Traders Association - mentioned in this call and present on Facebook: GreenTraderTax Traders Association | Facebook - can provide a defense against legislation targeted at Traders and their businesses. By establishing a business association not only can the business interests of Traders be better defended but also represented to a greater extent.
 
you're talking about a country that amended their constitution to ban alcohol and where 3/4 of them don't believe in evolution. Any damn stupid thing can pass!
 
Not to mention a load of them thinking the world is 6,000 years old and that dinosaur fossils are Gods way of ****ing with our heads !
 
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