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I suspect that investors would hardly notice the tax. Depending on the frequency at which they move in and out of stocks, it would likely end up being comparable to a mutual fund management fee.
The ones most at risk, including myself, are high frequency traders. The tax would seem to be aimed at hedge funds that constantly take micro profits, quickly moving in and out of positions.
Unfortunately, it severely impacts day traders and swing traders too. It is not uncommon for high frequency traders to have several hundred trades in a year. With smaller accounts that can be hundreds of thousands in volume, and several million dollars in volume for larger accounts. At those rates, that amounts to tens of thousands of dollars in additional taxes.
If politicians only consider the impact as it relates to investors (the vast majority), then the tax appears well targeted at Wall Street. It is only retail traders (minority) that are at risk of being put out of business.
The bigger impact is, I believe, what impact it would have on capital leaving the US for opportunities elsewhere.
If US markets are worth the premium for their stability, liquidity and diversity, then capital will remain and the politicians will pass the tax. If capital is expected to flee, the tax will not be passed.
If even just a few of the larger worldwide exchanges agreed on a tax (in order to leave nowhere for capital to flee), then the countries involved could reap huge revenues. After the amount of money that has been poured into trying to save the respective economies, that revenue stream has got to look pretty appealing right now!
Mike
--- In amibroker@xxxxxxxxxxxxxxx, Nick de Peyster <nickdepeyster@xxx> wrote:
>
> The odds of this passing strike me as extremely low. So far the government has been extremely supportive of the financial sector ... is there any evidence of a change in the winds?
>
> I would think this trader tax might hurt momentum investors rather than traders (especially counter-trend traders).
>
> Reason being that the momentum investors tend to count on the counter-trend traders to provide liquidity. Of the two, the countertrend traders have the shorter holding period and smaller gains so the tax will hit them most heavily.
>
> So what will happen is that the countetrend traders will become more selective to offset the tax. Pre tax the countetrend trades will become more profitable although after tax it won't make a difference.
>
> The momentum investors will take a bath, because there will be fewer countertrend traders on the other side.
>
>
>
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