Eliot Spitzer: Tax the Traders! It Would Solve Economic Crisis and Stop Reckless Activity

[Vox Populi]

55. let me clarify

The FTT as proposed would be a tax based on the value of the asset. So, if you wanted to buy 100 shares of AAPl at $600, right now that would cost you about $10 in commissions from a retail broker, about $1 i or less if you used a retail broker for more active traders.

The FTT at 0.25% of the value would mean it would cost an additional $150. $600 * 100 = $60,000 * 0.25% = $150
So, after buying 100 shares, you're already $1,50 per share in the hole! To break-even, AAPL would have to rise to 601.50 (if the tax were applied on a round-trip) or to 603 if per side. Even if you don't trade, the manager of your 401k or pension fund does - these costs will be passed on to you.

My alternative is to say the fee should be per transaction. So 100 shares of AAPL at (e.g. $0.01 per share fee) = $1 in extra taxes. This is palatable to small investors but it absolutely kills the HFT programs who need a price move of $0.02 now to break-even. This is a good thing. BTW, market makers would have to be exempted from this tax in their role as market makers, but not in the proprietary trading operations, which is what they use for HFT.