If the Volcker Rule had been in place when MF was around, would MF have been able to prop trade in any of their subsidiaries?
HK mkt has a 10 basis stamp tax on every trade⦠and they keep trading. The tax is implied in volatility n spreads⦠certainly not the end of the world.
A 10 bp tax on trading one ES contract round turn is about $130 (you would need to make 2.5 points just to break even from the tax, not including commish, spreads). No big deal eh? This will kill trading. Also, why is the FTT being brought up here? Is it buried in the volker rule?
Another example for equities: you trade nominal value of $1mm of buys and sells (which is very low to active traders). You pay $2000 in tax. Yikes!!! And while I don't know Don, I know he is highly respected but man, the FTT would close your doors even with exemptions (which is highly unlikely IMO). Volumes would plummet 90%. No more retail suckers to trade against. It would become a circle jerk of prop/mm trading with each other but stuck in quick sand.
I don't think it's more than a 50/50 right now. I think (no one knows for sure) that our people would either be exempt from the retail category, and that leaves a "possible" different determination. My GS legal people have been pretty sure about all this, but anything can happen I guess. Not to worried right now. Don
I don't you we have much to worry about, Don. http://blogs.wsj.com/marketbeat/2010/03/15/proprietary-trading-finally-a-definiton/ Hereâs how prop trading is defined in the 1,300-plus page Dodd regulatory bill unveiled Monday: (2) the term ââproprietary tradingâââ 14 (A) means purchasing or selling, or other wise acquiring and disposing of, stocks, bonds, options, commodities, derivatives, or other financial instruments by an insured depository institution, a company that controls an insured 19 depository institution or is treated as a bank holding company for purposes of the Bank Holding Company Act of 1956 (12 U.S.C. 1841 et seq.), and any subsidiary of such institution or company, for the trading book of such institution, company, or subsidiary; and does not include purchasing or selling, or otherwise acquiring and disposing of, stocks, bonds, options, commodities, derivatives, or other financial instruments on behalf of a customer, as part of market making activities, or otherwise in connection with or in facilitation of customer relationships, including hedging activities related to such a purchase, sale, acquisition, or disposal ⦠There, that wasnât so hard was it? Of course, where thereâs a rule, thereâs usually
OK, update as of today. From my CFA lobbyist type trader. FTT, likely will not take effect. Down to a 5% chance in his/their opinions. He does speak of "other stuff" (too much for here right now) that may be enforced, nothing "earth-shattering I'm told. Also saw this: http://www.tradersmagazine.com/news/financial-transaction-tax-france-109811-1.html Don