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Mark Cuban: place a 25 cent-per-share transaction fee on Wall St. trades

wallstreetpit.com

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Re: Mark Cuban: place a 25 cent-per-share transaction fee on Wall St. trades

#31

Post by yummyfajitas »

jsyedidia wrote: post #26
kqr2 wrote: post #18

Earlier quoted context omitted.

You could limit this tax to short term trades so it wouldn't penalize long term buy and hold investors.

Yes, the simplest solution is a 0.1 % tax on short-term trades. It's actually pretty strange that practically everything else one buys is taxed by the government but not shares. No surprise that we get all this useless and dangerous high frequency trading, and an obscenely large financial sector.

Capital gains on shares are taxed. Short term capital gains are taxed at a higher rate.

Re: Mark Cuban: place a 25 cent-per-share transaction fee on Wall St. trades

#32

Post by yummyfajitas »

_delirium wrote: post #20
yummyfajitas wrote: post #15

Earlier quoted context omitted.

Why do you feel that raising the bid/ask spread to $0.25 will prevent wildly oscillatory behavior? If anything, it will probably increase strange behavior. If you want to buy shares, you'll either need to pay a largish premium or else you'll need to wait a while. Fun fact: for the most part, prices have stabilized and spreads have narrowed as HFT has entered the game.

If everyone, even the huge institutional players, has to deal with non-zero bid/ask spreads, it does reduce incentive to spend a lot of effort exploiting tiny arbitrage opportunities with huge-volume trades, which could stabilize things overall. Admittedly, it's something economists disagree on.

It also reduces the incentive to engage in market making. This makes it more difficult to buy/sell stocks when you want to, and generally makes all trading (even the long term speculation which Cuban favors) more difficult.

Re: Mark Cuban: place a 25 cent-per-share transaction fee on Wall St. trades

#33

Post by hugh3 »

_delirium wrote: post #20
yummyfajitas wrote: post #15

Earlier quoted context omitted.

Why do you feel that raising the bid/ask spread to $0.25 will prevent wildly oscillatory behavior? If anything, it will probably increase strange behavior. If you want to buy shares, you'll either need to pay a largish premium or else you'll need to wait a while. Fun fact: for the most part, prices have stabilized and spreads have narrowed as HFT has entered the game.

If everyone, even the huge institutional players, has to deal with non-zero bid/ask spreads, it does reduce incentive to spend a lot of effort exploiting tiny arbitrage opportunities with huge-volume trades, which could stabilize things overall. Admittedly, it's something economists disagree on.

Arbitrage-exploiters do the worthwhile task of removing arbitrage. Putting arbitrage back into the market, visible to everybody but which everybody will sit on their hands until it becomes worth the 25 cent fee to exploit, seems like a way to create more instability.

Re: Mark Cuban: place a 25 cent-per-share transaction fee on Wall St. trades

#34

Post by joelhaus »

Two problems:

1) Acquiring a company worth $100mm pre-tax?

- After tax, the cost just went up to $125mm.

2) Global competition

- Foreign exchanges would under-cut domestic exchanges, attracting many US based companies to list there and if the US attempted to tax foreign transactions by domestic persons, then foreign investors would end up with an unfair advantage.

The idea of disincentivising short-term investments is a good one. Changes to existing capital gains rules or a progressive per transaction tax may be more feasible though.

Re: Mark Cuban: place a 25 cent-per-share transaction fee on Wall St. trades

#35

Post by hugh3 »

daniel-cussen wrote: post #17

You realize that, as much or as little sense as this makes, it's roughly what every voter wants to see happen?

Only the most ignorant. And even most of those could be talked out of it once somebody explained the downsides to them.

Re: Mark Cuban: place a 25 cent-per-share transaction fee on Wall St. trades

#36

Post by hugh3 »

davi wrote: post #8
wisty wrote: post #6

Why tax 25 cents on a $80,000 stock (like whatever Berkshire-Hathaway is now), and 25 cents on a "penny dreadful"? I understand the point of view - tax away high-frequency trading, but have we really thought things through? Obviously not.

FTA: "You could reduce the tax per share for stocks under $5 dollars to 5 cents. But I would leave it at 5 cents even for stocks priced at pennies per share or less."

Crazy. Imagine what this would do to any stock hovering around the $4.99 mark.

Re: Mark Cuban: place a 25 cent-per-share transaction fee on Wall St. trades

#37

Post by hugh3 »

I'm still confused as to exactly what problem he thinks he's solving here. That one-off weird glitch that happened for the first time in history yesterday and will probably never happen again? Or perhaps just sticking a few billion dollars extra into the gaping maw of the US Treasury?

And at what cost? Driving businesses out of the US? Severely lowering the attractiveness of listing a company on the US stock exchange? A billion other unforeseen consequences which neither I nor he is smart enough to see?

Re: Mark Cuban: place a 25 cent-per-share transaction fee on Wall St. trades

#38

Post by _delirium »

hugh3 wrote: post #33
_delirium wrote: post #20

Earlier quoted context omitted.

If everyone, even the huge institutional players, has to deal with non-zero bid/ask spreads, it does reduce incentive to spend a lot of effort exploiting tiny arbitrage opportunities with huge-volume trades, which could stabilize things overall. Admittedly, it's something economists disagree on.

Arbitrage-exploiters do the worthwhile task of removing arbitrage. Putting arbitrage back into the market, visible to everybody but which everybody will sit on their hands until it becomes worth the 25 cent fee to exploit, seems like a way to create more instability.

It can add instability though, if the arbitrage-exploiting is too large a proportion of the market. If 95%+ of trades are trades based on statistical market patterns, which are themselves created by those same 95%+ of trades, you get weird feedback loops that have more to do with chaotic systems and attractors than with supply or demand.

Re: Mark Cuban: place a 25 cent-per-share transaction fee on Wall St. trades

#39

Post by hugh3 »

_delirium wrote: post #38
hugh3 wrote: post #33

Earlier quoted context omitted.

Arbitrage-exploiters do the worthwhile task of removing arbitrage. Putting arbitrage back into the market, visible to everybody but which everybody will sit on their hands until it becomes worth the 25 cent fee to exploit, seems like a way to create more instability.

It can add instability though, if the arbitrage-exploiting is too large a proportion of the market. If 95%+ of trades are trades based on statistical market patterns, which are themselves created by those same 95%+ of trades, you get weird feedback loops that have more to do with chaotic systems and attractors than with supply or demand.

Looking at prices of any given share for any day other than Thursday (was it Thursday?) would you say that such instability and big feedback loops are a big problem?
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