Tobin Tax. Anyone want to help me build the Tobin Tax website?

[AyeYo]

Maybe just ignore the kids with the black/white worldviews and no understanding of trading and the rest of us can talk about this intelligently.

I'm browsing the wiki page and, without dedicating hours of time to read it all, maybe you can answer my question... 

What does this do to retail FX traders?  This is always my worry when these type of taxes and regulations pop up.  They have a tendacy to hurt the retail guys, while doing little to the multi-billion dollar banks.

Question:  Are you hypertrading?
If the answer is no and you are actually using the market as it was originally intended and setup 100s of years ago then is a 1% fee on each transaction going to crush your profits?  Are you in for at least a mid-term investment or just a quick buck?

"They have a tendacy to hurt the retail guys, while doing little to the multi-billion dollar banks."

A Tobin Tax would do just the opposite as all the major banks and hedge funds are now using algorithmic trading, hence the large scale resistance to the Tobin Tax (check out the EU and the proposition of a Tobin Tax).  They say it will be the end of the world and liquidity will go to 0 and the sky will fall if they have to pay a 1% tax, this is nonsense.  There are many benefits that I won't cover here (too late at night, and too long to cover) in the direction of making markets more stable and other benefits beyond just the revenue - which would be immense!  I've heard estimates in the Trillions.  Do you want to be taxed to help pay off the national debt or do you what the Corporatocracy that has hijacked our government to pay for it?

My issue with it is that I, as a retailed trader, should be able to make short-term moves all day long.  A 1% tax isn't going to crush my profits, but that's still 2% of guaranteed loss tacked onto every one of my round trip trades, basically an increased commission.  It wouldn't be the end of the world for someone with my trading strategy, but it would for many other retail people.  Taxing retail traders does nothing to help the system, but does hurt all the retail traders, and thus their brokerage firms as well.

If this was exclusive to big banks and/or only hold periods in the <5 second range, then I'd be in support of it.  As it is, it's just another way to hurt retail traders and banks will undoubtedly find a way around it.

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[Hawker]

I'd love for someone to tell my why speculation is bad.

I sense a thread derail coming, but yeah I don't see why speculation is so bad.

Apparently that's because both of you aren't aware of how much of it is going on, at least I hope that is the answer.  Before I write a 10 page history on this I'll test the waters: do you think that there is any amount of speculation that would be 'too much' or is it fine to have 50 times GDP of a country flowing in and out of that countries capital markets annually?

No, I don't think there is the concept of "too much".  Maybe you can explain why.  Even just a short summary.

I don't know if the Tobin tax is a good idea but the problem it addresses is huge.

When you try to buy or sell securities, hypertrading is a way that allows the big players to find the maximum price you are willing to pay.  They do it by placing and cancelling sales 1000s of times per second when a new buy order appears.  The effect is that us peons always pay close to the max we are willing to pay while the Goldman Sachs type institutions pocket the difference between that max and the price the security could be acquired at.

Its thought that transaction tax to eliminate those trades would be helpful.  If it provided a buffer for the "too big to fail" banks, so much the better.

Personally I'd worry that the exchange would simply take place somewhere else.  I don't know if the tax would work.

[AyeYo]

Why not just straight up ban HFT? 

[Reikoku]

I'm assuming you have no idea what you're talking about quoting an article that brief and lacking in any detail.  Do you know what a Stock Market is supposed to represent?  What does it mean for a company to invest in your stock and then sell it and then buy it again once per nano-second?  What does that even mean?  Building algorithms that exploit market gyrations to get 0.01% profits over and over again provides no net benefit to the economy.  Nothing new gets built, no research is done, no productivity is increased, no new products are made, no jobs are created etc.  Please do some research on the automated trading networks and look up more than 1 page articles on 'how horrible' a Tobin Tax is.    If you think Goldman Sachs is providing a service to civilization by hyper-trading I'd love to hear the argument.

I hate to tell you, but your personal definition of a 'service to civilization' doesn't benefit from a monopoly on the determination of value. If people didn't value shares, there wouldn't be a stock market in the first place. Shares obviously provide value, and some of that value comes from the ability to resell them. If you'd rather have a world without speculative investment, then you're talking about a world where it's very hard for a small business to get any capital whatsoever.

Once that speculative investment has happened, it is anybody's right to resell shares which they own. The rest is just down to human ingenuity. The fact that the resale of those shares doesn't 'do a service to civilization' is largely irrelevant, as it is just a part of a process which provides investment capital for building things, research and productivity.

[AyeYo]

I'm assuming you have no idea what you're talking about quoting an article that brief and lacking in any detail.  Do you know what a Stock Market is supposed to represent?  What does it mean for a company to invest in your stock and then sell it and then buy it again once per nano-second?  What does that even mean?  Building algorithms that exploit market gyrations to get 0.01% profits over and over again provides no net benefit to the economy.  Nothing new gets built, no research is done, no productivity is increased, no new products are made, no jobs are created etc.  Please do some research on the automated trading networks and look up more than 1 page articles on 'how horrible' a Tobin Tax is.    If you think Goldman Sachs is providing a service to civilization by hyper-trading I'd love to hear the argument.

I hate to tell you, but your personal definition of a 'service to civilization' doesn't benefit from a monopoly on the determination of value. If people didn't value shares, there wouldn't be a stock market in the first place. Shares obviously provide value, and some of that value comes from the ability to resell them. If you'd rather have a world without speculative investment, then you're talking about a world where it's very hard for a small business to get any capital whatsoever.

Once that speculative investment has happened, it is anybody's right to resell shares which they own. The rest is just down to human ingenuity. The fact that the resale of those shares doesn't 'do a service to civilization' is largely irrelevant, as it is just a part of a process which provides investment capital for building things, research and productivity.

You have no idea what you're talking about.  HFT isn't speculative investment, it's exploitation.

[Hawker]

Why not just straight up ban HFT? 

http://www.freakonomics.com/2011/03/28/should-high-frequency-trading-be-banned-one-nobel-winner-thinks-so/

Technically its difficult as it can move a lot of trade into the shadow banking system.  But retail investors are being gouged by the system right now so hopefully some way can be found to handle it, ideally in the exchanges themselves.

[AyeYo]

Why not just straight up ban HFT? 

http://www.freakonomics.com/2011/03/28/should-high-frequency-trading-be-banned-one-nobel-winner-thinks-so/

Technically its difficult as it can move a lot of trade into the shadow banking system.  But retail investors are being gouged by the system right now so hopefully some way can be found to handle it, ideally in the exchanges themselves.

Well that's just it.  Who cares if they gouge the shit out of each other?  As long as they're no longer raping and pillaging retail traders, then let them find whatever loop holes they want to go off and do it to each other.

Taxing it just seems like the wrong response.  By taxing it, we're giving it the rubber stamp of approval as ethical and ok to do, as long as they pay a piddly 1%.

[Sovereign]

I'm assuming you have no idea what you're talking about quoting an article that brief and lacking in any detail.  Do you know what a Stock Market is supposed to represent?  What does it mean for a company to invest in your stock and then sell it and then buy it again once per nano-second?  What does that even mean?  Building algorithms that exploit market gyrations to get 0.01% profits over and over again provides no net benefit to the economy.  Nothing new gets built, no research is done, no productivity is increased, no new products are made, no jobs are created etc.  Please do some research on the automated trading networks and look up more than 1 page articles on 'how horrible' a Tobin Tax is.    If you think Goldman Sachs is providing a service to civilization by hyper-trading I'd love to hear the argument.

I hate to tell you, but your personal definition of a 'service to civilization' doesn't benefit from a monopoly on the determination of value. If people didn't value shares, there wouldn't be a stock market in the first place. Shares obviously provide value, and some of that value comes from the ability to resell them. If you'd rather have a world without speculative investment, then you're talking about a world where it's very hard for a small business to get any capital whatsoever.

Once that speculative investment has happened, it is anybody's right to resell shares which they own. The rest is just down to human ingenuity. The fact that the resale of those shares doesn't 'do a service to civilization' is largely irrelevant, as it is just a part of a process which provides investment capital for building things, research and productivity.

You have no idea what you're talking about.  HFT isn't speculative investment, it's exploitation.

HAHAHAHAHHAHHAHA

[niemivh]

Why not just impose a 30-day waiting period on currency transactions? People who need currency for 'legitimate' purposes will just need to plan ahead. Seriously though,  what's stopping forex speculators from just using trading services based in countries with no such laws?

30-day waiting period on currency transactions would definitely minimize currency speculation although it would provide no revenue and actually cost money to administer and police the process.  And 30 days would be too long, although China implements capital controls so speculators can't make a killing on it's currency by driving it up and then selling it off.

Depends on the regulation around it regarding avoiding it, but that goes for most any law.  If it can be avoided by off-shoring should we just abolish all laws?

[niemivh]

Maybe just ignore the kids with the black/white worldviews and no understanding of trading and the rest of us can talk about this intelligently.

I'm browsing the wiki page and, without dedicating hours of time to read it all, maybe you can answer my question...  

What does this do to retail FX traders?  This is always my worry when these type of taxes and regulations pop up.  They have a tendacy to hurt the retail guys, while doing little to the multi-billion dollar banks.

Question:  Are you hypertrading?
If the answer is no and you are actually using the market as it was originally intended and setup 100s of years ago then is a 1% fee on each transaction going to crush your profits?  Are you in for at least a mid-term investment or just a quick buck?

"They have a tendacy to hurt the retail guys, while doing little to the multi-billion dollar banks."

A Tobin Tax would do just the opposite as all the major banks and hedge funds are now using algorithmic trading, hence the large scale resistance to the Tobin Tax (check out the EU and the proposition of a Tobin Tax).  They say it will be the end of the world and liquidity will go to 0 and the sky will fall if they have to pay a 1% tax, this is nonsense.  There are many benefits that I won't cover here (too late at night, and too long to cover) in the direction of making markets more stable and other benefits beyond just the revenue - which would be immense!  I've heard estimates in the Trillions.  Do you want to be taxed to help pay off the national debt or do you what the Corporatocracy that has hijacked our government to pay for it?

My issue with it is that I, as a retailed trader, should be able to make short-term moves all day long.  A 1% tax isn't going to crush my profits, but that's still 2% of guaranteed loss tacked onto every one of my round trip trades, basically an increased commission.  It wouldn't be the end of the world for someone with my trading strategy, but it would for many other retail people.  Taxing retail traders does nothing to help the system, but does hurt all the retail traders, and thus their brokerage firms as well.

If this was exclusive to big banks and/or only hold periods in the <5 second range, then I'd be in support of it.  As it is, it's just another way to hurt retail traders and banks will undoubtedly find a way around it.

Much of the financial industry has become parasitical to the actual real productive economy.  We can't have an economy exclusively (or even primarily) of money making money; it is the antithesis of a productive industrial economy.  

The desire not to be taxed is nothing new, I don't want to be taxed but revenue is going to have to be collected if we want to have a government.  I (and most lower and middle class people) get taxed enough, it is time for the financial sector to pay their fair share.  The alarming thing is we have a class of people in our country that basically pay no taxes and therefore aren't paying for all the benefits that they are gaining by the system: infrastructure, police, firemen, the ability to operate a corporation with limited liability, an educated work force, military defense, etc.
 

[niemivh]

I'd love for someone to tell my why speculation is bad.

I sense a thread derail coming, but yeah I don't see why speculation is so bad.

Apparently that's because both of you aren't aware of how much of it is going on, at least I hope that is the answer.  Before I write a 10 page history on this I'll test the waters: do you think that there is any amount of speculation that would be 'too much' or is it fine to have 50 times GDP of a country flowing in and out of that countries capital markets annually?

No, I don't think there is the concept of "too much".  Maybe you can explain why.  Even just a short summary.

I don't know if the Tobin tax is a good idea but the problem it addresses is huge.

When you try to buy or sell securities, hypertrading is a way that allows the big players to find the maximum price you are willing to pay.  They do it by placing and cancelling sales 1000s of times per second when a new buy order appears.  The effect is that us peons always pay close to the max we are willing to pay while the Goldman Sachs type institutions pocket the difference between that max and the price the security could be acquired at.

Its thought that transaction tax to eliminate those trades would be helpful.  If it provided a buffer for the "too big to fail" banks, so much the better.

Personally I'd worry that the exchange would simply take place somewhere else.  I don't know if the tax would work.

Finally, someone who can quote facts on what is actually observably occurring the in the real world. 

 

The markets are too big, they wouldn't just be able to leave because it would still be profitable to do business here; but it would have to be actually investment not scamming the system based on technicalities.  It would drastically change the markets as they are presently because a vast majority of the trading is done my these algorithmic computers.  But the benefit would be to all that are actually in the stock, currency or security markets for legitimate purposes.

[tsvekric]

a 1% Tobin tax is extremely high.  Most Tobin tax proposals have been a fraction of that amount and would still have significant distortionary effects according to any of the positive studies done.  

I also do not see a problem with HFT or speculation on its own.

And why is this posted in Bitcoin Economics?

[niemivh]

Why not just straight up ban HFT? 

A ban would garner no revenue.  A Tobin Tax would pay for itself many fold over.  Can you imagine the regulatory body that would have to be created in order to enforce this?  It would be much easier and take a smaller bureaucratic organization to simply tax them at a paltry 1%.  And a 1% Tobin Tax would effectively ban HFT as if they even HFT for 1 second (as they are presently trading per-milisecond) they wouldn't have much left would they?

[niemivh]

I'm assuming you have no idea what you're talking about quoting an article that brief and lacking in any detail.  Do you know what a Stock Market is supposed to represent?  What does it mean for a company to invest in your stock and then sell it and then buy it again once per nano-second?  What does that even mean?  Building algorithms that exploit market gyrations to get 0.01% profits over and over again provides no net benefit to the economy.  Nothing new gets built, no research is done, no productivity is increased, no new products are made, no jobs are created etc.  Please do some research on the automated trading networks and look up more than 1 page articles on 'how horrible' a Tobin Tax is.    If you think Goldman Sachs is providing a service to civilization by hyper-trading I'd love to hear the argument.

I hate to tell you, but your personal definition of a 'service to civilization' doesn't benefit from a monopoly on the determination of value. If people didn't value shares, there wouldn't be a stock market in the first place. Shares obviously provide value, and some of that value comes from the ability to resell them. If you'd rather have a world without speculative investment, then you're talking about a world where it's very hard for a small business to get any capital whatsoever.

Once that speculative investment has happened, it is anybody's right to resell shares which they own. The rest is just down to human ingenuity. The fact that the resale of those shares doesn't 'do a service to civilization' is largely irrelevant, as it is just a part of a process which provides investment capital for building things, research and productivity.

You're correct in your assessment in this is what a stock market SHOULD represent.  But what does it represent when you are buying and holding a stock for a split-second?  When you brag in money magazines about how you hired 10 mathematian PhDs to build you a custom algorithm that hyper-trades and effectively is just slurping money out of the market without any net benefit to anyone else than the person doing the trading.  In any transaction there should be 2 people trying to maximize their utility, with most professions and specializations this is easy enough to see.  The legitimate role of the speculator should be to mitigate risk, and provide liquidity and arguably price stability (depends on scenario) in each of these there is a utility maximization between 2 parties (i.e. each of these roles provides a legitimate service to the rest of the economy).  But what about hyper-trading?  Can the same be said?  Is benefiting off of others without any benefit to them moral?  I would argue not, and therefore the desire to 'ban' this through taxation.

There really is too much subject matter to cover here but please 'Google' what Goldman Sachs specifically is doing and if you can tell me how that should be allowed please let me know.

[niemivh]

Why not just straight up ban HFT? 

http://www.freakonomics.com/2011/03/28/should-high-frequency-trading-be-banned-one-nobel-winner-thinks-so/

Technically its difficult as it can move a lot of trade into the shadow banking system.  But retail investors are being gouged by the system right now so hopefully some way can be found to handle it, ideally in the exchanges themselves.

Well that's just it.  Who cares if they gouge the shit out of each other?  As long as they're no longer raping and pillaging retail traders, then let them find whatever loop holes they want to go off and do it to each other.

Taxing it just seems like the wrong response.  By taxing it, we're giving it the rubber stamp of approval as ethical and ok to do, as long as they pay a piddly 1%.

Do you want to allow parasitical 'speculators' (and HFT isn't really even speculation, and gives the legitimate role of speculators a bad name, it's more of a private tax on legitimate traders) power in your society?  There is something wrong with someone gaming the system and effectively leveling a tax (through HFT) on all legitimate business, but this tax is not a tax to enrich the Treasury and pay for something at least possibly worthwhile, it goes to people who have no qualm with conducting rape-and-pillage economics.  Do you want such people to gain power in the world?  If so, then do nothing.  If you don't want to allow beneficiaries of ill-gotten loot to have massive influence over your life (through subsequent purchase and corruption gained through this loot) then do something about it, as I am proposing by supporting a Tax to end this.

[niemivh]

Why not just straight up ban HFT? 

http://www.freakonomics.com/2011/03/28/should-high-frequency-trading-be-banned-one-nobel-winner-thinks-so/

Technically its difficult as it can move a lot of trade into the shadow banking system.  But retail investors are being gouged by the system right now so hopefully some way can be found to handle it, ideally in the exchanges themselves.

The thing to understand is that HFT is a forced, private tax by the parasites against the real economy.  By imposing a 1% tax on transactions legitimate business would be benefited as the HFT wouldn't be allowed to occur.  And if the HFT moved into the shadow banking system who would they be sucking off of?  They can't simply all suck off each other as HFT is reliant upon the real economy to provide its 'host capital'.  A shadow trading exchange without a Tobin Tax (after it was implemented) would be so filled with HFT that no legitimate trader would touch it.

[Hawker]

niemivh they may have been a time between the crackdown on insider trading and the development of flash trading when it was possible for a human being to trade securities profitably.  My feeling is those days are gone forever - machine based trading is not going away.  So really the tax only makes sense if we want the revenue.  And then the question will arise whether or not this is the most effective way of raising revenue?

[niemivh]

a 1% Tobin tax is extremely high.  Most Tobin tax proposals have been a fraction of that amount and would still have significant distortionary effects according to any of the positive studies done.  

I also do not see a problem with HFT or speculation on its own.

And why is this posted in Bitcoin Economics?

Most free-marketeers don't see are unable to see the incredible bias of all economists.  They believe that free markets are the solution to all our woes and that all economists (at least on their side) have no stake in the fight.  

Can I see some of those studies?  It's likely that I've seen them before and that they are totally wrong, well not 'wrong' just biased in favor of those who produce nothing and suck of the real economy (not referring to speculation in general, just HFT).  The resistance to a Tobin tax is not some benign triviality, it is through a lack of this tax that the system is largely gamed at present and there are people making an incredible pile of money in the process.

[niemivh]

niemivh they may have been a time between the crackdown on insider trading and the development of flash trading when it was possible for a human being to trade securities profitably.  My feeling is those days are gone forever - machine based trading is not going away.  So really the tax only makes sense if we want the revenue.  And then the question will arise whether or not this is the most effective way of raising revenue?

Tax havens are so prevalent in our modern time that this seems like a great place to raise revenue.  In addition there is no problem with trading with algorithms or computers per se, but HFT is parasitical.  Please Google Goldman Sach's trading schemes and tell me how this should be allowed to persist.

[Anonymous]

a 1% Tobin tax is extremely high.  Most Tobin tax proposals have been a fraction of that amount and would still have significant distortionary effects according to any of the positive studies done.  

I also do not see a problem with HFT or speculation on its own.

And why is this posted in Bitcoin Economics?

Most free-marketeers don't see are unable to see the incredible bias of all economists.  They believe that free markets are the solution to all our woes and that all economists (at least on their side) have no stake in the fight.  

Can I see some of those studies?  It's likely that I've seen them before and that they are totally wrong, well not 'wrong' just biased in favor of those who produce nothing and suck of the real economy (not referring to speculation in general, just HFT).  The resistance to a Tobin tax is not some benign triviality, it is through a lack of this tax that the system is largely gamed at present and there are people making an incredible pile of money in the process.

Let the people make a pile of money. Wealth is not limited unless you set it up that way from the start.