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In reply to the discussion: Republican Doomsday Plan: Cave on Taxes, Vote ‘Present’ [View all]jmowreader
(50,726 posts)One of the most important things to be done is eliminating high frequency trading.
HFT works by purchasing order flow and trading ahead of it. To make it simple, when a large order of a stock is placed - think hundreds of thousands of shares - the price goes up a couple cents per share. If you have a very fast computer, you can wait till a big order is placed and in the 0.2 seconds before the trade is confirmed, place your own million-share order...then five seconds later when the stock goes up a cent a share, unload the position and keep the proceeds.
Two cents per share is the right amount to tax. It will add almost nothing to the cost of buying stock - a lot of $40 stock will rise from $4000 to $4002 - and it will make HFT so risky people will stop.
The other solution is to just declare it front-running and ban it for that, but taxing it out of existence will work better. And the right wing editorials decrying the death of HFT will be a joy to post here.