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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

#21

Post by yummyfajitas »

For whatever reason, Mark Cuban seems to feel that the only legitimate form of investment is long term speculation:

If you don’t think the company you are buying is worth at least a quarter more than what you are paying, why are you buying shares?

But markets need more than long term speculators. Suppose you want to sell shares to cash out of your long term speculative investment. Who do you sell to?

If another speculator wishes to buy shares right now, there is no problem. But what if the other speculator wants to buy next week?

Enter market makers. They buy from you right now and sell to the other speculator next week, making money off the spread and taking the risk that prices will move unfavorably in the short term. Everyone gets to execute their trades almost immediately and this makes the speculative activity which Mark Cuban favors much easier. Why is this activity deserving of being taxed into oblivion?

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

#22

Post by brianobush »

supposedly 2/3 of the market is from automatic trading applications - the ones that try to make a little money here and there. this would proposal would kill that portion of the market. at least market volume would represent something more meaningful than it does now.

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

#24

Post by tansey »

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 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 accompanied by new regulations on derivatives and dark pools, but on the surface it doesn't seem like a bad idea.

Currently, all major banks have:

1) Shadow markets setup (dark pools) to allow big investors to take positions without anyone knowing.

2) Servers sitting beside the exchange that get to see all trades before the public does.

Neither of these things should be legal.

I don't know if I believe that high-frequency traders provide a necessary liquidity. I can see both sides on that, but I think we will never know until we impose a tax like Cuban is suggesting. If we don't like the results, we can always repeal the tax.

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

#25

Post by yummyfajitas »

brianobush wrote: post #22

supposedly 2/3 of the market is from automatic trading applications - the ones that try to make a little money here and there. this would proposal would kill that portion of the market. at least market volume would represent something more meaningful than it does now.

Supposedly 2/3 of the packets on the network are sent from one server to another (e.g. webserver to DB) rather than from the server to the end user. Eliminating those packets would make network traffic represent something more meaningful than it does now.

Granted, your web server can't talk to the database anymore. But at least we've killed a portion of the internet which I don't understand, and which is mostly used by a bunch of geeks I don't like!

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

#26

Post by jsyedidia »

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.

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.

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

#27

Post by tansey »

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.

Futures contracts are considered long-term capital gains, even if held for short periods of time.

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

#29

Post by jrockway »

What about bonds, options, futures, etc.?

But anyway, it seems like the volatility that automated trading causes is the tax on the automatic traders. Anyone who bought, say, Accenture the day before this happened and sold it the next day just took losses similar to the wider market. (And the market is on a downtrend for good reasons, not "some computer program fucked up".)

Only the algorithms that were trading as it fell to zero lost money. It's unlikely a real person or long-term investor would have noticed it at all. So people that have their retirement savings in an S&P500 index fund have nothing to worry about, and the people that trade every millisecond have the same concerns as always.

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

#30

Post by nandemo »

tansey wrote: post #24
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 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 not serious. Yeah, I know he's rich and all, but he doesn't understand how the stock market works.

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