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

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

#51

Post by anamax »

sgk284 wrote: post #42
nandemo wrote: post #30

Earlier quoted context omitted.

A 1% tax would still be huge. Traders measure trading cost in basis points (100ths of 1%). Such a tax would affect not only high-frequency traders, but also all market makers and even long-term investors like pension funds and mutual funds. To operate an index fund, for instance, you have to buy and sell millions of shares everyday. A 1% tax would make impossible to operate an index fund cheaply. Cuban's proposal is…

I think he understands it just fine. Implement a tax that requires people to actually buy stock for reasons other than its price. Make it too expensive to trade millions of shares every second to make small fractions of a return. Make people buy shares because they want to see the company succeed, not to make a quick buck. Back to basics. I kind of like the idea.

> Implement a tax that requires people to actually buy stock for reasons other than its price.

Huh?

I buy stock to make money. I make money when I buy at a lower price than I sell said stock. Note that price plays a role in both transactions.

Serious question - who buys stock for reasons other than price expectations?

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

#52

Post by rdtsc »

ianferrel wrote: post #14

A per-share tax makes no sense, because a share is an arbitrary measurement. This would effectively be a regressive tax on small-time investors. As Cuban himself mentions, it would put pressure on companies to do reverse splits. But I believe he underestimates how much pressure. You'd see stratification, with most companies issuing the A-class big investor shares with prices in the $10s of thousands ($100s?) and B-cl…

Why not do it per transaction then per value of transaction. Individual transactions are around $5-$8 for non-day traders. So there is already a flat fee to buy or sell. It is very inefficient to issue a lot of small buy/sell orders. So this would discourage the high frequency of trading. Then there is an additional price based fee. The higher the value the higher the fee. The size of the individual share would make no difference then.

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

#53

Post by joelhaus »

ahlatimer wrote: post #49
joelhaus wrote: post #34

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 i…

After tax, the cost just went up to $125mm That's only assuming the company is trading at $1/share, which Cuban's proposal is saying should be taxed at $0.05/share, raising the cost to $105mm. The actual tax will be dependent on the valuation of the company divided by the number of shares there are. It's not a straight 25% tax across the board.

Thanks, this illustrates the first problem well, I was just pointing out the kind of impact Cuban's proposal could have on a valuation. Any tax implemented like this would still have a proportionate effect on returns.

Not sure that anyone is trying to make a case that we need less shares; rather, we need a system that incentivises a focus on fundamentals.

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

#54

Post by vecter »

sgk284 wrote: post #42
nandemo wrote: post #30

Earlier quoted context omitted.

A 1% tax would still be huge. Traders measure trading cost in basis points (100ths of 1%). Such a tax would affect not only high-frequency traders, but also all market makers and even long-term investors like pension funds and mutual funds. To operate an index fund, for instance, you have to buy and sell millions of shares everyday. A 1% tax would make impossible to operate an index fund cheaply. Cuban's proposal is…

I think he understands it just fine. Implement a tax that requires people to actually buy stock for reasons other than its price. Make it too expensive to trade millions of shares every second to make small fractions of a return. Make people buy shares because they want to see the company succeed, not to make a quick buck. Back to basics. I kind of like the idea.

I don't think you understand that people who make markets (add liquidity) decrease YOUR investment costs. These market makers can only trade millions of shares per second (a vast overstatement) IF there is actual demand for that. Suppose there is such demand. Then, the market makers are providing a valuable service by supplying liquidity for people who want to buy or sell.

A sales tax would vastly increase costs for everyone involved. Your parents pension fund would generate lesser returns because it costs them more to enter and exit positions. Your "back to basics" quip is bullshit. What does "going back to basics" even mean? People trade because they think they can make a profit or hedge their risk. That's all there is to it, nothing "more basic".

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

#55

Post by c1sc0 »

nandemo wrote: post #30
tansey wrote: post #24

Earlier quoted context omitted.

I was thinking the same thing. Wouldn't a percentage tax make more sense? If you just require a 1% tax on all transactions, it would basically be equivalent to what Cuban was saying (he mentioned a $0.05 tax for shares under $5), and it wouldn't pressure companies to do reverse splits. Even people who trade frequently (e.g. 1-2 times a day) wouldn't likely see much cost associated with this. This would have to be acc…

A 1% tax would still be huge. Traders measure trading cost in basis points (100ths of 1%). Such a tax would affect not only high-frequency traders, but also all market makers and even long-term investors like pension funds and mutual funds. To operate an index fund, for instance, you have to buy and sell millions of shares everyday. A 1% tax would make impossible to operate an index fund cheaply. Cuban's proposal is…

yep, 1% would be insane, I started trading actively for the first time on friday & I would certainly not be in the game with my money with a 1% trade punishment

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

#56

Post by yummyfajitas »

anamax wrote: post #51
sgk284 wrote: post #42

Earlier quoted context omitted.

I think he understands it just fine. Implement a tax that requires people to actually buy stock for reasons other than its price. Make it too expensive to trade millions of shares every second to make small fractions of a return. Make people buy shares because they want to see the company succeed, not to make a quick buck. Back to basics. I kind of like the idea.

> Implement a tax that requires people to actually buy stock for reasons other than its price. Huh? I buy stock to make money. I make money when I buy at a lower price than I sell said stock. Note that price plays a role in both transactions. Serious question - who buys stock for reasons other than price expectations?

Some people buy (a small number of) stocks for dividends. But that's very rare, since dividends are taxed twice while capital gains are taxed only once.

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

#57

Post by mark_l_watson »

ianferrel wrote: post #14

A per-share tax makes no sense, because a share is an arbitrary measurement. This would effectively be a regressive tax on small-time investors. As Cuban himself mentions, it would put pressure on companies to do reverse splits. But I believe he underestimates how much pressure. You'd see stratification, with most companies issuing the A-class big investor shares with prices in the $10s of thousands ($100s?) and B-cl…

I totally agree with you. It would be better to charge a flat rate, perhaps 0.5%

Cuban's basic idea is good though. That said, the chances of Congress passing legislation that would limit Wall Street profits is very low. And, neither a democrat or republican president would sign such a bill if by some small chance Congress passed it.

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

#58

Post by [deleted] »

kqr2 wrote: post #18
ianferrel wrote: post #14

A per-share tax makes no sense, because a share is an arbitrary measurement. This would effectively be a regressive tax on small-time investors. As Cuban himself mentions, it would put pressure on companies to do reverse splits. But I believe he underestimates how much pressure. You'd see stratification, with most companies issuing the A-class big investor shares with prices in the $10s of thousands ($100s?) and B-cl…

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

[deleted]
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