Forgive me, but that's a very romantic and slightly... out-of-date view of the market making activities. In other words, you want your average girl to be 'good' and literally lie back and think of England as you do onto her as you please? No longer true, and has been false for years. The idea that you could force these firms to quote a fixed-width, reasonably-sized, usefully narrow, symmetrical, continuous, unconditional and two-sided prices is unrealistic in at least six out of seven respects. I mean, if you are a regulator (sounds like, i could provide you with some solid evidence of how exactly these firms work as I've been watching them in awe for years. Let me just say here, that their overarching goal is to withdraw liquidity when the customer is most likely to need it. There are very ingenious and quite effective in second-guessing your next move. One has to develop some tools to see their actions, but it is all there for you to see, glaringly obvious and quite depressing if you think of the enormous mental effort that has been expended on devising those active market making strategies... all that lateral thinking, all that lightspeed technology, just to screw you up. How much efficient would American autos be if those fat bonueses were instead forked out in Detroit...? So you might think, but before you act on your intuition to regulate, before you reach for you carving knife, bear with me a second longer. As someone already pointed out here, apart from the reaction speed, you no longer can tell the difference between a modern, i.e. an active market maker and your median Joe-useless-program-trader (no Joannas in this field as far as I know In fact some of these firms use separate shill quotes, pretending to be the customer! And all that to widen the spread just when you were about to trade. In fact, the competition among them does not help much, because they use the same conditioning info (i.e. your actions and the market action) and react to it in exactly the same way... yes, its a herding behavior. Regulators would probably want to turn back the clock, and force selected market makers to become passive again, extracting their socially useful function from the useless speculation, right? That was already tried before. Selected industry leaders, i.e. large, 'efficient' companies were nationalized (while others, smaller, were liquidated) and allotted monthly production targets, of tasty, healthy, durable, socially useful goods. Even grocery stores had empty shelves for decades and the authorities needed a five-meter-high wall just to stop people from fleeing. Because central planning is what you are effectively advocating. Extracting the socially useful function from the useless ones, which the government disapproves of, is a very old socialist idea. Today it looks more outdates than the Tobin's original tax rate in today's 0.00001-spread Forex. The IMF's director, Strauss-Kahn, is exactly right that modern socialists are anything but - they are all living in a time-warp, with their attemps to micro-manage the economy's every market... I tell you that experience teaches it didn't work in diffuse, competitive, multi-agent markets. Collectivization failed miserably when applied to markets such as food production. Some socialist countries didn't even bother to extend their reign over the farmers. But those stubborn enough to force their preconceived ideas of social good, and like the Soviets marched forward with central planning of the farming industry, managed to create a famine of biblical proportions... And your idea of a 'carve up' of the socially useful plain-vanilla market making for the benefit of the society has even more unintended consequences. First it would widen the bid/ask spreads to the max, because this is exactly what oligopoly markup pricing is all about. If you make a short visit to monopoly SPX options and monopoly ONEChigago SSFs, you might be able to taste the future you envisage... spread so wide you could park a bus between the bid and ask. Then restricting competition among market makers by forcing them to adopt passive 'useful' strategies would only accentuate the already dangerous (according to Wilmott) herding behavior among the high-frequency traders. I mean, if there is only one (approved) market-making strategy in town, whilst others are taxed out of existence, you get from here to the portfolio-insurance-style crash in no time at all. And last but not least: who would play the village idiot, i.e. the greater fool, the shooshine boy who puts money on the market maker's table? Commercials trading VWAP once a month? I ask you: who would bring the money to the table, by panic-shorting those painful bottoms, by chasing those parabolic 'trends' and believing in the magic presence of antigravity in price spikes? I mean, the noise trader, the despised common speculator is important for this very reason that he (and I will sometimes (well, usually) 'foolishly' go the 'wrong' way. Which makes him sometimes the only one to patch a liquidity hole universally created by your herding market makers. Rational models will not save markets from 'consensus' divergences - it takes the uninformed hopeful 'idiots' who will bravely step in an obvious downtrend (or usually - much earlier). Your officially approved market makers would just widen and skew their spreads and collect the winnings untaxed. What a Carve Up!
................................................................................... ECNs were created in order to create a more fair and efficient marketplace....It took many years for this to occur, and thus the creation of ECNs has closed the bid ask spread....saving 100's of Billions in spread differences....and ECNs police what used to be rampant market maker collusion..... Did NASDAQ market makers successfully collude to increase spreads? A reexamination of evidence from stocks that moved from NASDAQ to the New York or American Stock Exchanges http://ideas.repec.org/p/fmg/fmgsps/sp170.html What would be rather incredible is to wipe out hard earned market efficiencies brought forth by the personal computer and ECNS.... A more modern day view or introspect by proposed increases in governance and their revenue to do so would be to establish a more fair and more efficient marketplace by adding another ECN called GOVT....This ECN would create evergreen revenues to the govt. and promote efficiency by attaching to the setting a more fair and orderly marketplace....particularly for retail....as well as much lower cost for retail ..... Why pay the advertising costs of a firm with the average 400 share order ? Why would one want to pay $9.99 per order....when one could pay 20 cents....? Why not eliminate all dark pools and force all out in the open rather than giving priviledges to the few....? Why create a marketplace that favors high concentrations of holdings that are difficult to buy/sell ? A much better marketplace would be one that levels the playing field for ....while making the markets more efficient....defragmented....available to all retail worldwide in the currency and language of choice....and should never be taxed in any form in the name of efficient capital.... Why ? Which marketplace would be better for all ? A marketplace that has 10 managers that oversees $10 Billion that have similar views.....require additional expense....are trained similarly....and thus have to move towards the exit door at once ? Or A $10 Billion marketplace that is comprised of 10 million individuals with more dispersion of opinion....operating with lower costs ? ............................................................ If anything the govt...could assist in being part of a fairer more efficient marketplace worldwide..... This means making the US market user friendly to the BRIC countries and vice versa.... ............................................................ Thus if the marketplace were to become even more efficient ....thus inviting many millions of people to participate....the end result being more innovation because of more opportunities..... How much clearer can this get ? ............................................................ The problem in govt. is leadership.... By the person....when one reviews the biographies of politicians one will find their actual backgrounds lacking....Most voting in the TT case have no background in securities training at all....but yet get to macro manage its regulations ? This is why the populist lobby system will never work well....Too many non qualified people making decisions cannot have the intended and hopeful results..... The current govt. think is to increase efficiency and innovation to a country that is desperate for bettering its economy ????? They are doing just the opposite with a TT tax..... Non qualified people will bring a country to its knees..... It is happening RIGHT NOW..... ........................................................................... Glass Stegall needs to be mandated at once.... The govt. wants to force capital into non interest bearing productive markets..... THIS WILL NOT WORK.....IT OVERPRICES RISK What would work would let hard earned savings attract interest......and let the risk marketplace price itself with a fairer and more efficient securities marketplace..... This is not happening....
The banks would love the TT tax.... It would guarantee wider and "govt" protected spreads for the BIG Banks.... A govt. guaranteed BIG Banks profit machine..... Which RETAIL only.....pays for..... This is so bad....it is sadly funny..... It would be like building an ice house in the desert..... And so just what is the purpose of a TT tax ? To make BIG banks pay for their economic ills ? In what way does a TT tax do this ? A TT tax rewards BIG Banks ...... So when the politicians claim the opposite..... Just what is the populist population going to be thinking ? They are going to be thinking that THEIR politicians are taxing the BIG banks.... When the truth is ...they are paying them even more..... Anyone get the INSANITY yet ??????
Just for the record; we had this transaction tax before. We had it between 1914-1966. During this era we had both Democratic as well as Republican Presidents. Nobody, irregardless of party got rid of it. Ironically, it was a Democratic President with a Democratic Congress who finally got rid of it in 1966. So Anaconda is basically right; we shouldn't have an illusions that one party will be better than the other one on this issue. Furthermore, the only people who have objected publicly to this tax are Democrat politicians. The Republican politicians have sadly been quiet. Heck, it was Democrats who started the circulation of a letter opposed to this tax. Once this tax is in place, it is likely to provide some revenue for the government. If the GOP takes over, they would have to cut spending or find new revenue elsewhere if they wanted to cut this tax. Easier said than done especially when one looks at 1914-1966. Based on both parties records, I wouldn't trust either party on this issue. Our best chance by far is to not have it enacted in the first place.
............................................................................... Produce revenue ????? Or Negate revenue ?????? It would highly negate revenue not only in the marketplace but in overall economics..... .................................................. The earllier period is not comparable because there were no ECNs or personal computers.... After many years...it was the RETAIL that got fed up with collusive MM spreads thereby creating the ECNs.....to the degree that MMs and Specialists were mostly forced out ... Why ? Efficiency ........................................... Sometimes ....it is somewhat useless to state the truth to a populist pitchfork carrying crowd.... Stupidity can rule for short spats of time....till the hard truth be known.... At the moment the govt is populist which equates to the ultimate in stupidity.... The US is quickly trending towards being a giant Haiti.... Why not just use the Voo doo queens in New Orleans in govt. ????? It is just what the non qualified with the podium and votes believe.... Not ....THE TRUTH..... One cannot compare the two periods..... This would be like comparing a period when internal combustion engines did not exist....to today...... Convincing an angry populist about a subject matter which requires above average intelligence....is like trying to take a banana from a hungary monkey.....
Unfortunately capitalism as a form of economy is not guaranteed by the law. Capitalism in the US was broken when the government bailed out the failing banks. Apparently they wanted to save the jobs. But they are going to kill financial jobs the other way. And the retail traders will be the first whom the government wants to let go.
No question.... The Govt is killing the US.... THEY are taking the US towards HAITI IN RECORD TIME !!!!!!!!!!!!!! The fast enactment of a 10/5% C tax only.... And The enhancement of a defragmented tax free direct access world wide electronic exchange..... Would create a New Golden Era..... Labor shortages will quickly occur in the US.....
We currently don't have a Republican President and this issue is being discussed in Congress now. So, it doesn't matter what a Republican President would do or not do regarding signing this into law. <b>What does matter is this</b>; once this is law, history hasn't exactly shown that Republican (or Democratic) Presidents have been willing to get rid of it. It is important that this doesn't become law in the first place. Once it is law, history has shown that nobody, irregardless of party, is willing to get rid of it. I don't want this get into a political thread. I can't stand either party. Let's focus on the issue at hand, transaction taxes. And my point again is that we need to prevent this from becoming law in the first place. Otherwise we will be stuck with it.
.......................................................... How can this not be a partly political thread.... When this total nonsense IS POLITICAL ???????