Exactly. Regulation and taxation has nothing at all to do with the stated intentions for the regulation and taxation. It has everything to do with creating economic rents for industry insiders and big companies. However, I do think that they will probably extend exemptions, if any, to all market makers because it's pretty difficult to write regulations which exclude small market makers and the big guys don't try for that because they are afraid of breaching anti-trust regulation and they're not bothered by microscopic market making firms anyway. The tax will gum up the markets. It'll widen spreads, increase the cost of capital for companies and generally discourage investing and listing on U.S. exchanges. This "economist" quoted in the NYT piece, Baker, is a rank idiot and he should have his Ph.D. revoked.
Although, Anaconda, I can't see the exchanges getting behind the tax. They depend solely on volume and this would kill volume.
$100 billion = "only in theory." If they tax them like this, futures, forex, stock & options day traders will die off (who will pay $500 tax a contract to trade???). Thus tax revenue from this goes away, not be gained. The exchanges and brokers will shrink, cutting further tax revenue Even investors may invest less in stock with a tax. Cutting off some of the liquidity that makes companies have access to $$$ to grow. Some institutions will relocate offshore. $100 billion a year? I would be amazed if it got even half of that, not counting the lost tax and jobs.
I am a scalper on the 30 year bonds, and if the government places this tax on us, then I'll start looking at other markets to trade, like FESX in Europe. If necessary, I will find a futures broker to use outside of the U.S.
I live approx. 30 minutes from the Canadian border. If necessary, and although it takes time, I will obtain citizenship, and move there to conduct my trading.
Look at who owns & truly runs the exchanges. They are publicly traded. Banks/BDs are common, Goldman, Barclays and a few other familiar names pop up. They will get the core volume that they need, one way or the other. If they have to add or raise fees to compensate, so be it. The daytrading mentality is reaching for rationalization as if this would destroy the whole market, but the reality is that the investor is not affected significantly by this rule. Your standard institution is not either. This tax is only significant on the scalping time frame. It renders daytrading on a tiny time frame near impossible, just like it was back in the days before electronic exchange and dirt cheap commissions. Anyone want to look up what it cost your average retail trader to do a roundtrip 30 years ago? Some guys here know from experience. Think of it this way. What if the exchanges raised their fees back to 1960-1970 levels? You would have the same effects, even on the Big Wall Street firms. Let's say that the Wall Street cronies gang got special pricing, hence giving that edge they used to enjoy. Quickly competition would appear, as technology has made the fees of that size obsolete. With a tax, you accomplish the same, while rendering possible exchange competition helpless. The exemptions are the exclusive edge. The big guys are evolving and taking that edge back. At best, the requirements for exemption will be capital intensive with legal & bureaucratic bullshit. I doubt this would be implemented soon, but it has gotten more juice in the recent years.