It really makes you wonder doesn't it. They believe if their careers are taxed out of existence it will make up for their incompetence.
Yeah OK... To raise revenue I'd like to see a higher income tax on corporations, rich people (even if it includes me) and tight regulations against speculative lenders... Lots of scrutiny on mortgages that sort of thing... That's where the problems are... There is a revenue shortage and a borrowing/lending problem. Obviously, there is also a spending poblem which also needs a fix. There isn't anything wrong with the market technology. I don't want to see a tax on technology or innovation... The fact that people are using computers to trade now is here to stay, that won't change. You should be free to place your order as you see fit in a free market. I can't believe that people would support a tax on HFTs but not on let's say "house flippers" that contributed to the bubble in housing. Even if they do go ahead and place a tax on HFTs it won't be that big of a deal as long as it is reasonable... Let's say .0003 a share... For 100 000 shares that is only a $ 30 fee which will eat into profits but won't completely destroy the game. Mind you these guys will probably have something like $ .10 per share or something crazy that will simply destroy most short term trading. For the record any transaction tax at an exchange will probably be applied to everyone. There is no way to separate algo. orders from everyone else. Unless the algo. users sign up or have special accounts. So more likely than not the tax will apply to all short term traders or probably to all traders. I think that's really what's at stake here... They want to tax all traders in order to hand more control over to the banking cartels and the Central Banks... I'm sure Goldman and DB (or any other large institution for that matter) will find a way around the tax for their trading desks... I think it's more about removing free competition by getting revenue for the government from the competitors of the big banks.
Cool, I agree with you completely about the merits of a tax - and find it laughable that the progressives choose to fix everything with a new tax. My only real disagreement with your premise is in regards to HFT's somehow providing some sort of indispensable value to the markets - the liquidity they provide is not to be counted upon and is entirely conditional, just like most any other market participant. In fact, HFT's have been shown empirically through many third party reviews to distort markets during stress.
But I think you said all right...? "Just like any other market participant..." It happens to be true... You're not dealing with "machine intelligence". You're dealing with programmers who are simply using a computer to do the BID/OFFER work for them. So in other words you're still dealing with people that react to the market in strange ways. That's why I don't think that there is anything wrong with them. I also think that higher market participation ensures tighter BID/OFFER spreads. So I don't mind them putting up lots of phantom BID/OFFER orders. You know what...? If they have a phantom offer of 100000 shares and you hit that offer, it will execute and there is nothing that they can do about it. A prop buddy of mine was telling me how he screwed an algo. (or probably an algo) doing that... He kept seeing 100000 shares popping up and vanishing... So he set an order for 60000 and waited for the thing to show up... It flashed and he hit the offer... The 100000 never came back and the market went up a bunch for him to get out... Obviously, the other side had to cover their short of 60000 shares and that took the market up somewhat. So... It works both ways... I've done short term trading (scalping) too but I don't do it anymore...