If for some reason this idiotic transaction tax at some point gets enacted, what would the volume be like for example in a high volume stock like AAPL that on average trades about 40 million shares per day? Would it then only trade maybe 5 million shares per day? and what about a low volume stock like GLF that trades on average 315,000 shares per day. Would it trade under 100,000 shares per day? I know volume would fall off a cliff but big stocks that trade over 20 million shares per day will still trade probably over 5 million shares per day and the spreads would be much wider which for some traders is a good thing.
i don't have an answer, but i would think that the transaction tax could possibly contribute to more whippy days; fewer traders means lower liquidity and increased volatility and further erosion of confidence. as a trader i like volatility, but without liquidity, forget it.
Just my guess-- I think at MINIMUM volume would drop 80-90% across the board. Huge fees = less trading = less liquidity = wider spreads = less liquidity = less trading = less liquidity = OUT OF BUSINESS for 95% of short term traders.
Just send your Congressman & Senators this article. Jan. 20 (Bloomberg) -- The crude-oil market needs more speculators to help stabilize prices six months after the traders were blamed for pushing the commodity up to a record $147.27 a barrel, Deutsche Bank said in a report. A lack of liquidity is distorting prices http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a.qCENa7jXdc
The trading industry would move offshore. America would lose another industry, New York and Chicago would lose 20% of their tax revenue... but if that's what people want, then that's what people will do. Obama admitted during his campaign that he knew that tax increases were bad for the economy but that his voters wanted it because of class envy.. it's nuts but it could happen maybe...
If its true that over 90% of volume on the nyse and nasdaq is from automated trading systems which generally earn less than .25% of profit per trade; then it could be expected for volume to drop by that much since they wouldnt be profitable with a transactions tax. Supporters of such a tax are probably calculating revenues from this tax using current market volume statistics, sadely there would be 5 to 10% of the volume left . Lets hope we never find out what this stupid tax would actually do.