Good job to kill of HFT
Reader comment on: Both Parties Do It, Europe Edition
Submitted by Lyle (United States), Aug 16, 2011 17:33
It really does capital allocation no good to have high-frequency trading. So it lowers volume, since the buy and sell happen in a few milliseconds its not a deal. Note that the tax will be only 60% of the quoted value since this should increase the basis and decrease the proceeds from the sale. We used to have a much higher private tax on trading run by the Wall Street Cabal. (After all the NYSE was set up to ensure that members charged no less than a defined amount for a commission). Eventually it went away after many predictions of the end of the world when it happened. It may well mean that the spreads on trades may increase, but it will also push towards share owners who care how the company does rather than selling at the drop of a hat. Hong Kong and the UK have such a tax (UK 50 bp), and NY state had one from 1905 to 1982 or so, the NY tax ran .05 per share above $20 and less on lesser share values. So the main change would be to continue the value at a fixed percentage rather than top it $.05 as NY did.
So the tax is not new, in fact I suspect one might find such a tax in the 1765 stamp tax, except that there were few shares to transfer in the colonies at the time. In particular also hit the derivatives as Buffett was right they are weapons of mass financial destruction.
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