An Order Cancellation Tax on HFT Would Curtail Deceptive Quoting

Discussion in 'Taxes and Accounting' started by ASusilovic, Mar 26, 2010.

  1. Recently, there has been a great deal of talk in Congress about instituting a tax on transactions, the so-called "trader tax". The goal is to raise needed revenue for the federal government and to force Wall Street to pay for the losses incurred by the federal government in supporting systemically important financial institutions. Yet, there is clearly a problem in that a large portion of the tax will fall on everyday investors as transaction costs rise for mutual funds and pension funds holding the bulk of Main Street's savings. The transaction tax idea, while impacting Wall Street to some degree, has massive collateral damage by raising costs on retail investors.

    We are not necessarily advocating increasing taxes rather we are operating under the assumption that the government needs to raise revenue and wants to do it by taxing Wall Street. To that end, there is a more effective alternative to the "trader tax" that also has the positive result of working toward greater transparency in the equity markets.

    While the mechanics of the equity markets are under constant evolution with the consistent goals over time of increasing speed of execution and advancing price discovery, the major changes seen in the last decade have not come without drawbacks.

    The prevalence of disingenuous quoting on the visible book is extremely high and we propose an order cancellation tax to remedy this detriment to the financial markets. While most retail investors probably have little concept of what high frequency trading is or its impacts, active equity traders have seen its pronounced imprint on the markets.
  2. TraDaToR


    They need to shut up now.Tobin is dead, no need for any tax at all.
  3. Taxes always grow and multiply. Once the precedent of taxing orders or transactions is established, it won't be long until great mischief is done by Washington. The distinguished moderator might be momentarily in favor of "punishing" high-freq traders, or other whipping-boys, but I'd suggest he be careful what he wishes for.
  4. In this very moment I am observing a deceptive quoting order at bid 1167.75 for 4300 lots in Mini S&P June, now dissapearing "only" bid 368. What a difference...And this bullsh.t is observable 22,5 hours every single day.
  5. Rather than get foamed up about un-traded-upon quotes, why not look to the record of actual <i>transactions</i> to guide your thinking?
  6. Correct, you don't want to go down this road, one thing leads to another.

    With all due respect to OP, I find this whining about spoof bids more prevalent when indices are rallying; when there are thousands offered and we're careening down it's usually "weee, this is great, look at this POS fraud market drop"

    If some clown is 67.75 bid for 5000, hit it or sell some up a tick or two if you suspect he's trying to goose the market. Who's being deceived? What harm did this guy cause you?

    All this bitching about algos and HFT strikes me as whining from those who can't adapt. Much as I want, we're not going back to the 1970's where an index market would be 1160-1170 ten points wide with paper coming in with market orders paying the bid and offer.
  7. sprstpd


    Down with all new forms of taxes. Just raise the income tax instead.
  8. It'd be hard to believe there's a chance in hell a tax could be enacted that negatively affects the likes of Goldman and not the average trader.
  9. Question :

    what is the maximum allowed ordersize in Mini S&P ? Can you "hit" a 5000 lot order ?
  10. They don't need to tax anything. They do need to get rid of dark pools though. There's no reason MMs can't provide that liquidity out on the lit exchanges.
    #10     Mar 26, 2010