For those who don't follow the Transaction Tax thread: http://www.bloomberg.com/news/2010-...action-tax-proposal-takes-shape-ftd-says.html Big trouble ahead.
How could you possibly have any liquidity in a market with a .01% tax? Unless they had exemptions to market makers and such, in which case it would defeat the purpose of generating any kind revenue. How dumb.
0.01% compares favorably to stamp duty of 0.5% on equity transactiuons in the UK. On the other hand, if applied on the underlying of exchange traded futures, the tax alone would be triple the size of reatil commission on S&P 500 E-minis. As usual, the devil is in the detail. For example, whether for options it's 0.01% of the price of the underlying or 0.01% of the option price.
I think the purpopses of this tax are: 1) to penalise speculation 2) To set up a levy on over the counter derivatives and the like.
No, it will move to Asia - where it is already moving in massive steps. Who is interested anymore in rigged markets a la USA ? We are not.
asia is just more of the same as the u.s. , only hope is for an exchange to allow only point and click to have real price discovery.
i see you are now resident in cayman, bevore in Zug/Switzerland. are you residing there "virtualy" ore for real? how is live on that small island?
For eurostoxx50 futures it will be slightly more than triple.. for dax the cost of trading each contract will go up 10 fold as each contract has a higher notional value (25x7000) as opposed to eurostoxx (2800x10). If the 0.01% applies to both buying and selling then by my reckoning this tax will generate about 2 billion euro a year in revenue from Euro Stoxx 50 futures alone. And over 1 billion euros for dax futures. I havent done the figures for shatz bobl bund etc. But they probably going to be in the same league. Obviously in real world they will never generate anything like this as the volume will dry up atleast 10 fold across german futures markets. And the products will also get poached to offshore exchanges (eg to the CME) and the liquidity will fall to effectively 0 in germany. (The EuroxStoxx 50 isnt even a germany only index, it is a pan european index, so i can see atleast that one moving out of germany very fast and eurex or the german goverment not being able to stop it moving either). Market makers will have to be exempt to save the markets but retail day traders on eurex will be history unless they are exempt too. Ideally anyone not holding overnight should be classed as a liquidity provider and be exempt (or subject to a much lower rate eg 0.001%), but that is wishful thinking on my part.