Thanks. So IF such a tax, the way it's currently being framed, were ever passed in the U.S., theoretically a U.S. trader could trade through a broker that offers access to the HK exchange (for example) and not pay a TT. (-?) Then I'm not sure what the big deal is ... just learn a new instrument and move on ... trading is trading. If everybody knows this, seems like trying to pass a TT anywhere is just a retarded exercise.
Thanks zdreg. A transaction tax of 0.2 % is the death for any day trader. I remember 0.1% being discussed in Germany just recently, now 0.01% or 0.02 % for one round turn respectively, seems to be favored to get this law passed....anyhow, it's scary.
Thanks for the info zdreg. Since everyone's been saying volume would flee to Asian markets I figured they were a safe alternative, but I guess that's not the case.
don't need volume if you are small trader..most of the volume is HFT anyways. you can have 100 guys only trading it. it's not the 'volume' but how many participants are in the market.
Germany's transaction taxes were abolished once already in 1991. ---------------------- http://www2.parl.gc.ca/content/lop/researchpublications/bp418-e.htm "Sweden, on the other hand, appears to be a classic example of an experiment gone wrong, while Germany, like many other countries, has decided that the costs outweigh any benefits from this type of tax." ---------------------- So, they know it does not work, yet they persist.
Good link. Thanks! I believe transaction tax in Germany is politically motivated. It is some way to "punish" financial institutions for the cost of the bailouts. As with many "best intentions" the collusion of interests has led to something that has no benefits, only drawbacks. The currently proposed rate is too low to affect complex derivatives and securitised mortgages (which alone are responsible for bank failures) because thes products have sufficiently large margins and are not frequently traded. However, teh rate is high enough to hit the bottom line of conservative investors (such as those who invest in index-tracking funds: the funds will have to pay transaction tax every time tehy rebalance portfolios).
In the current political environment, how can you have any strong conviction that politicians won't do something dumb but popular like a transactions tax? It happened in the UK, it happened in Sweden, it happened in other countries, it can certainly happen in a quasi-socialist country like Germany.
Th German government have made a big mistake here. If they put a tax on coffee, sure people will pay 10c per cup. But futures markets are different. Any country in Europe can set up a futures exchange without the tax and take all the Eurex business. 90% of Eurex volume comes from outside Germany. That money can move very easily. All this will do is destroy a great German business. Futures markets are not like securities markets. They primarily exist to hedge risk. If you can't hedge risk efficiently, then bad things happen. The current Eurex monopoly is built on competitiveness, which will completely disappear after this tax is introduced. This is a very shortsighted decision that will actually damage the German economy and its standing as a financial leader in Europe.
Did you ever care to have a look how long it takes until a liquid futures market like ES or ESTX reaches high liquidity? Obviously not. It takes years. Establishing a futures exchange is not like building a coffee shop.