this could be the last days of futures trading if this passes because the value of futures for even on contract is high. commissions would be like $150 per contract or $300 round trip.
IB is futures and options. IB is gone too since it's the value of futures. forex only remaining trading platform for daytraders.
bascially all speculator volume is wiped out only real hedgers like companies or farmers will be hedging or transacting on futures with their brokers like the old days of futures. volume was so small only 2 hour s of floor trading
Raskolnikov , I don't day trade .I buy and hold ,it came down to this , you can not hold a stock overnight anymore , it's not supposed to be this way , so FCK you too my friend.
Title: A Technical Analysis of Impact of Proposed Transaction Tax ----------------------------------------------------------------- Summary ======= Want to know some detailed and interesting numbers. Please read on. In short, the market will shrink 83.5% to a level of 16.5% of total average trading volume. The proposed transaction tax total were to be 27.04 billion (minus losing capital gain, and others) instead of naively expected 160 billion per year after considering the shrinking volume. Consider losing capital gain and losing businesses, the actual total tax increase from the market were close to zero or negative. (UK actually already proved this result by seeing its total tax amount plat (plus problems) after introduced the transaction tax. ) If this tax were to pass, for short term traders, they were out. Even the so so investors were to be hit hard as well. This is what the "negligible" transaction tax will bring us. Please read more if you want to know some detail numbers and why this can be concluded from a different point of view as compared to many of you see the same results from various angles. Market data =========== Total stocks considered: all major stocks at NYSE/NASDAQ/AMEX 5033 syms (simply because I have market data for all these stocks). 6 N/A 21 Conglomerates 111 Utilities 289 Industrial 394 Consumer 459 Basic 503 Healthcare 848 Services 898 Technology 1504 Financial Key numbers and Analysis ======================== This analysis is based on market data as of the market close on Feb 18, 2009. Total current market cap (considering the 5033 stocks only): 12513408098648.40 = 12.51 trillion Total 20-day-average trading amount per day ( total sum of average trading volume multiplied by closing price): 130071335268.84 = 130.07 billion per day Total trading days for 2009: 252 20-day-average transaction tax per day if it were passed: 650356676.34 = 650.34 million per day Transaction tax for 2009 assuming the market does not shrink: 163889882438.73 = 163.88 billion per year Ttransaction tax for 2009 considering the factor of expected market shrinking: 27.04 billion per year. DOW index from Jan 4, 1960 to Feb 18, 2009 from 679.06 to 7555.63, up 1012.66%, equivalent to accumulative growth of 5.0399% per year. The average total market share turnover rate is 261.94%, that means, all the shares (this number will be much higher if considering only the outstanding shares). The current average trading cost (assume just 0.05%, that is, you pay only $5 dollars to sell or sell 1000 shares of a stock at price of $10.0 per share). So, a round-trade, the cost is around 0.1% already. Market turnover rate: 2.69, that is, 269% per year, that is the market hold shares for average of around 4.5 months. (this number will be much bigger if considering only outstanding shares). A normal average market investor/trader assuming he does just the average turnover rate of 2.69 times per year. His average market performance would be 5.0399% - 0.1% * 2.69 = 4.77% per year (before capital gain tax) since 1960. This is the number without the proposed transaction tax. If the transaction tax were added, assuming the market ignores this so called "negligible" tax. The market (investors, not short term day-traders) should accept the average yearly return of 5.0399% - (0.1% + 0.5%) * 2.69 = 3.42%. The market is smart. It will adjust itself to an acceptable level to make a yearly return of closing to 5%. Assuming 4.5 is an acceptable level. Then, the market has to decrease its turnover rate (that is liquidity) to a level which will make investors (not day traders or speculators) happy (probably not) at 4.5% yearly return. Calculating this new equation, we get the turnover rate should be at 89.9% per year. That means the average investor needs to hold his stocks for over one year and one month as compared to the current 4.5 months for an average yearly return of 4.77%. This is equivalent to the average market total trading volume be shrunk to 33% of the current level. If all short term traders are gone, this number will be much much smaller. If the market does not accept 4.5% return, the turnover rate should be even lower. I would put the trading volume be shrunk, by 100% - 33%/2 = 83.5%, reasonably, to 33%/2 = 16.5%. So, the proposed transaction tax were be shrunk to 27.04 billion. Impact on short-term traders ============================ Please read more why all short-term traders should leave the market. It will be funny to see how big the impact would be for an average short term trader. Here I am using the turnover rate of 252, that is, using all his account buying power every day, no overnight holdings. His cost per year was 252 * 0.1% = 25.2% without transaction tax. Many short term traders can survive with this number. 25.2% of commissions per year is just fine for a good trader while most day traders see this a big burden already. For a very exceptional trader, if his performance is more than 252 * 0.6% = 151.2% per year. He may still survive. Remember this does not assume any leverage. If this same trader uses 1:4 leverage, his performance should be yearly 604.8% to keep positive. 1:4 leverage is a quite small number. I believe many traders are using a much bigger leverage. As far as I know, I do see any of elite-traders can reach such enormous performance, even neke (the guy who turned his account from around 140K to almost half million in year 2008, would be a loser and were to owe a sizable transaction tax at the year end.) So, a day trader, if he is not stupid and is not yet proved to be very very exceptional, should not be surprised to loss money year after year once this tax were added into law. No solution to get around. It is wise to simply stop trading US markets. How about swing traders? I can calculate more numbers for this group, but their situation will be very much similar to day traders. The more they trade, the more they pay, the more they lose. Impact on long-term investors ============================= The strategy of buy and hold proves not always working, so average investors should not be in the market. But this group of traders, they are still traders anyway, they have to follow this strategy blindly. If they do trades, they have to trade between themselves without the help of short-term traders to provide liquidity they need desperately when they see something to happen in the horizon. So, we will see only the real investors who buy and hold, for a period of at least one year, so as to only charge a negligible 0.5% for a round trade, (better hold for ever to totally avoid this tax) to earn dividend. What a market it would be! I will see a market consisting of only real investors and, of course, real gamblers who does not care about transaction tax. This is a market low liquidity and high volatile. If the sole purpose of this transaction tax bill is this plus a huge unexpected blow to damage the current and the future US economy. Then the goal is done. The market is done. Congratulation for people who support this bill. PS. I just talked with a MBTrading guy. He looks never heard of this tax yet. After I explained to him. I believe he started worrying, probably for the future of his firm, his job, etc. Here is his response: "It is terrible idea I think, and you're right most brokers will probably shut their business. The whole world trades the US market for it's liquidity. People will look to other markets outside US if it were to pass ...". I am a technical person. I would be very much interested to do more analysis, for free, if you get an idea to evaluate the impact of this tax by actual numbers. Thanks, aqtrader
I am wondering how many times Defazio has sponsored a transaction tax bill in the past? His previous attempt (HR 7125) never made it out of committee so he had to reintroduce the bill for the new session of congress. I'm sure he's brought forth these bills in the past and they have crashed and burned. -Guru
http://www.rallycongress.com/no2tradertax/1536/tell-congres-to-block-trader-tax/ Easy way to email your Senators!