Just had a conversation with an economist last weekend. Yes, I must be a masochist. I learnt about a theory called "noise trading" It basically says anyone trading off technical analysis or price patterns, specially day traders and retail traders, are harmful for the markets and prevent the markets from reaching "informational efficiency" whatever that is. This theory acknowledges that noise traders may make more money but they are still irrational (in other words idiots) because they make more money just by taking more risk. I am beginning to understand where the pattern day trading rule came from. Now these academics want a tax on securities transactions, in other words higher commisions... Check this PDF out. http://w4.stern.nyu.edu/finance/docs/pdfs/Seminars/051f-saar.pdf I am not qualified to make a long critique of this theory but it sounds like saying that anyone not trading according to their fundamental theories must be banned. These guys must grow up and accept that unfortunately markets don't work the way they think. Never did, never will. Hope there are politicians out there who have faith on liberty and free markets and oppose these proposals.
There are... Libertarians. But they will never exert more than a cursory influence in Congress as the hoi polloi are not concerned about "what's right"... but rather how much gummint cheese they gonna get.
gnome you're right. but at least we have the brokers who definitely won't like lower trading volumes. they might lobby against these proposals.
What academics will never understand about the capital markets is price is price regardless of how it gets there. Maybe they should write a paper on the effects of mutual fund management fees on their pension fund returns.......that would better serve their buy and pray attitude.
Seems to me that trading will gravitate to China as well...where there will not be any US just wonderful änd amazingly stupid bureaucrats¨... Hey...this just might be a good thing...Next thing you know...they´ll be complaining about not getting enough money from the IMF.... Oh well..they still have their trust accounts and IVY League buddies ...good riddance USA,,,
I thought the PDT rule arose after many "consumers" were pulled into "DayTrading" and lost their life savings. Many letters to Senators and Attorney Generals....prompted action... They thought by increasing the higher minimum grubstake would filter out the undercapitalized and leave just the experienced and serious and stop the abuse and letters to them. In free markets, there was a much better solution, by just enforcing....that brokers did their due diligence and got to know their clients...sheesh a two year old could of solved it with a simple change in margin rules...instead of these PDT restrictions we now have. Michael B.
savant you might be right but why no one "protects" those losing their life savings in Las Vegas. There is no minimum stake of 25K to enter a Vegas casino. Also, why there is higher leverage for those above 25K. That makes me think there is more to it than just stop people from losing.
Protecting the integrity of the Markets, I believe is your point or the answer... Las Vegas has worked hard on their integrity Good thread. Michael B.
The $25k min was brought about by NYSE...market maker paid for politics...at the time they harassed every business that was a pioneer in direct access trading...This is what you call Walll Street bureacrat politics...Direct access basically erased the stock commissions on Wall Street... For that matter...no one should be allowed to start any small business of any kind in the US... Bureaucratic nonsense... However...direct access won the game because of efficiency...but not without a big fight... Good going Gerald Putnam ...and the Townsends....