The last thing this tax would do would enhance mkt stability. Volumes would plummet and liquidity would disappear. Spreads would widen out to ridiculous levels causing huge volatility at times. Good luck to the Mutual Fund manager who has to sell hundreds of thousands of shares. Their trades alone would cause stocks that normally aren't that volatile to plummet. Every time these guys went to sell individual stock circuit breakers would be hit.
The people/groups who are so in favor of this tax would take a financial beating as their IRA's and 401k's would get obliterated as the markets plummets.
Last but not least....the tax revenue expected to be generated by this tax would probably be around 10-20% of what they thought. The geniuses that came up with this tax based revenues on what volumes are today. If this tax gets passed volumes will fall by 80% or so.
This tax has no chance of ever being implemented.
This assumes that banks and other big professionals are not exempted. The banks would love this to pass with them getting an exemption. All other market makers would be put out of business which would allow them to control the market and spread. It would widen a bit but not by too much, allowing them to make more money while keeping everyone else out.
Of course trading bonds involve trading lots in hundred thousand dollars and is largely institutional now.
However, that what this taxing scheme wants to achieve - take money away from the economy and channel it into government deficits.
If there is no trade tax for bonds somebody will come up with product suitable for retail. I think that you can do some bond buying retail from the government directly now and then sell them on Ebay.
There are also bond ETFs so just rename them FTTEETFs (ftt exempt etf) and we are back in business. Happy trading!
This assumes that banks and other big professionals are not exempted. The banks would love this to pass with them getting an exemption. All other market makers would be put out of business which would allow them to control the market and spread. It would widen a bit but not by too much, allowing them to make more money while keeping everyone else out.
There is no way in hell that this tax would ever be passed with exemptions to big banks. They are the exact people that the people who are pushing this tax are pissed at.
What are they going to do.....exempt banks, trading firms (essentially mkt makers at times),etc and then only tax retail type accounts?
The people whining for this tax all have investments in retail type accounts.
There is no way in hell that this tax would ever be passed with exemptions to big banks. They are the exact people that the people who are pushing this tax are pissed at.
What are they going to do.....exempt banks, trading firms (essentially mkt makers at times),etc and then only tax retail type accounts?
The people whining for this tax all have investments in retail type accounts.
That's exactly what was passed in France, and what do you think the U.K. Stamp fees are? None of the big firms pay that tax.
What are they going to do.....exempt banks, trading firms (essentially mkt makers at times),etc and then only tax retail type accounts?
They will exempt the banks, and maybe also pension funds.
This tax will not raise much money with all these exemptions.
They want it because they think it is a weapon they can use against hedge funds and speculators. Like banning short selling. A country 'comes under attack' from the market.. they probably they think can bump up the FTT to 5% (or some other punitive rate) for a period to keep out the evil speculators.
It is being sold as a tax on banks to gain the public support needed for its introduction.
[...]Italy’s representative said it would be “very important to look at other circumstances”, in what could be a hint that Germany could do more to help bring down borrowing costs for Italy and Spain.
Italy signed the initial letter requesting legislative proposals be drawn up by the Commission, but on Friday linked “credible measures” to combat the debt crisis to giving its agreement for enhanced cooperation.[...]
