So Start Taxing Them

The easiest way to stop this kind of nonsense would be to put a small tax on each transaction:

A top government economist has concluded that the high-speed trading firms that have come to dominate the nation’s financial markets are taking significant profits from traditional investors.

The chief economist at the Commodity Futures Trading Commission, Andrei Kirilenko, reports in a coming study that high-frequency traders make an average profit of as much as $5.05 each time they go up against small traders buying and selling one of the most widely used financial contracts.

The agency has not endorsed Mr. Kirilenko’s findings, which are still being reviewed by peers, and they are already encountering some resistance from academics. But Bart Chilton, one of five C.F.T.C. commissioners, said on Monday that “what the study shows is that high-frequency traders are really the new middleman in exchange trading, and they’re taking some of the cream off the top.”

Mr. Kirilenko’s work stands in contrast to several statements from government officials who have expressed uncertainty about whether high-speed traders are earning profits at the expense of ordinary investors.

The study comes as a council of the nation’s top financial regulators is showing increasing concern that the accelerating automation and speed of the financial markets may represent a threat both to other investors and to the stability of the financial system.

The Financial Stability Oversight Council, an organization formed after the recent financial crisis to deal with systemic risks, took up the issue at a meeting in November that was closed to the public, according to minutes that were released Monday.

The gathering of top regulators, including Treasury Secretary Timothy F. Geithner and Ben S. Bernanke, the Federal Reserve chairman, said in its annual report this summer that recent developments “could lead to unintended errors cascading through the financial system.” The C.F.T.C. is a member of the oversight council.

Everyone knows they are screwing individual investors.

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171 replies
  1. 1
    redshirt says:

    Or, traditional investors are stupid. Free Market bitches! Why do you hate freedom? Etc Etc.

  2. 2
    Just Some Fuckhead says:

    Wall Street moves from one money-stealing gimmick to the next. They ain’t doing anything about this one until they find a new one.

  3. 3
    Ted & Hellen says:

    Oh John, why do you hate America and all that is great about her capitalist system, the greatest force for good in the history of the world?

    Huh?

    WHY?

  4. 4
    danimal says:

    I want a world in which carbon is taxed along with high-frequency trading. Wouldn’t that be a better way to address the fiscal cliffamageddon? Besides playing with income tax deductions and rates, let’s tax things that we want to reduce.

    And where’s my damn pony?

  5. 5
    Violet says:

    We are the marks.

  6. 6
    Alex S. says:

    A transaction tax needs to happen. Trading has to return to its long-term origins. It should be about investment, not gambling.

  7. 7
    MattF says:

    Seriously. This is not something that requires heavy-duty analysis. We agree that high-speed trading is profitable, right? So where do you think these profits are coming from? Out of thin air? Or, perhaps, the traders have printing presses in their basements…

  8. 8
    trollhattan says:

    “Andrei Kirilenko”

    Isn’t he an NBA small forward? Busy dude.

    In the meantime, the magical banks(pbut) are very put upon that they haven’t managed to isolate incoming Senator Warren. Let’s sing together: “Awwwwww.”

    It’s a sad day on Wall Street: Elizabeth Warren, the financial industry’s least-favorite senator-elect, has been assured a seat on the Senate’s powerful Banking Committee, according to four sources cited anonymously by the Huffington Post.
    __
    Big banks spent millions of dollars and thousands of lobbyist hours trying to avoid this very scenario. But, in the end, Warren’s expertise, and her experience setting up the Consumer Financial Protection Bureau, won out. Now, barring a last-minute change in plans, she will join Democrats like Jack Reed, Chuck Schumer, and Sherrod Brown on the body that oversees the Dodd-Frank rule-writing process and other financial industry regulations.

    http://nymag.com/daily/intel/2.....-true.html

    Funny, how the tactic of transforming Warren from an ernest, plain-speaking, smart-as-a-whip lady into history’s second greatest monster didn’t take with the public. Where have I seen this tactic used before…?

  9. 9
    Bubblegum Tate says:

    Andrei Kirilenko

    Wait, AK-47? The NBA player? Wow, he’s quite the renaissance man.

  10. 10
    jeff says:

    Everyone has feelings. My parents are sticking up for billionaires and corporations because they feel sorry for them. This is another example of someone being hurtful towards the unfairly advantaged.

  11. 11
    El Cid says:

    @trollhattan: Tee hee hee.

    Guess that whole strategy to keep her from heading the CFPB worked out splendid for ’em, didn’t it?

  12. 12
    burnspbesq says:

    “Everyone knows” a lot of things that turn out to be unadulterated bullshit. How about we wait for the peer review process to run its course before we do something that turns out to worse than doing nothing.

  13. 13
    Amir Khalid says:

    This kind of high-speed trading shouldn’t even be legal. These people are making money off millisecond blips in stock prices that don’t have a real-world existence. This is essentially stock churning with a high-tech twist.

  14. 14
    BGinCHI says:

    UN Disabilites treaty went down 61-28 today, despite Bob Dole appearing on the Senate floor in support.

    Fucking GOP assholes.

  15. 15
    David in NY says:

    Good tax. Also get rid of the carried interest loophole.

  16. 16
    Evinfuilt says:

    @Alex S.:
    It would have the most beneficial outcome of any solution. Though I would also love to add taxing Capitol gains as income and add a few more tax brackets.

    Make CEO’s employees again, instead of feudal lords.

  17. 17
    RareSanity says:

    @trollhattan:

    crap!

    Less than 15 comments in, and you already beat me to it!

  18. 18
    Phoenician in a time of Romans says:

    Mr. Kirilenko’s work stands in contrast to several statements from government officials who have expressed uncertainty about whether high-speed traders are earning profits at the expense of ordinary investors.

    What a load of bullshit. I bet if you went to the internal documents or even the annual reports of these companies, they’d leave you in no doubt that the reason why they’re paying money for the computers that run high speed trades is because they expect to see a much larger return as a result.

    “We don’t know they’re earning a profit. They might be forking over millions for their systems as a sort of jolly jape.”

    And if they’re earning a profit, it can only come at the expense of other people in the system

  19. 19
    handsmile says:

    @ John Cole

    It’s known as the “Robin Hood Tax” and was introduced as a Congressional bill by Rep. Keith Ellison (D-MN5) in September: H.R. 6411, the Inclusive Property Act.

    Here is a link to a related advocacy group and a quotation from one of its principal economists:
    http://www.robinhoodtax.org/

    As economist Robert Pollin, co-director, Political Economy Research Institute (PERI), University of Massachusetts-Amherst, explains, “In its essentials, the idea of a financial market transaction tax is simple. It would mean that financial market traders would pay a small fee to the government every time they purchased any financial market instrument, including all stock, bond, options, futures, and swap trades. This would be the equivalent of sales taxes that Americans have long paid every time they buy an automobile, shirt, baseball glove, airline ticket, or pack of chewing gum, eat at a restaurant, or have their hair cut.”

    Of course, snowballs in hell have a better chance than the passage of this bill.

  20. 20
    slag says:

    @danimal:

    I want a world in which carbon is taxed along with high-frequency trading. Wouldn’t that be a better way to address the fiscal cliffamageddon?

    Tax shift! Tax shift!

    During one of those Occupy marches, I kept trying to come up with a catchy chant about demanding a structural tax shift. Tragically, my creativity failed me.

  21. 21
    RareSanity says:

    Mr. Kirilenko’s work stands in contrast to several statements from government officials who have expressed uncertainty about whether high-speed traders are earning profits at the expense of ordinary investors.

    Then where exactly do these bafoons think the profits are coming from?

    It’s pretty obvious that these profits come at the expense of anybody that doesn’t have a direct connection to the network of the exchange. It doesn’t take a financial genius to figure that one out.

  22. 22
    burnspbesq says:

    @David in NY:

    I’m entirely in favor of taxing all compensation at ordinary income rates, but not at the cost of comprehensively fucking up the fundamental principles of taxation of the owners of interests in passthrough entities, which as a general matter ain’t broke, despite what ol’ bootlicking Monte Jackel seems to think.

  23. 23
    Lavocat says:

    You’re right. This is a huge no-brainer. Just the cost of doin’ bidness, fellas.

  24. 24
    Ash Can says:

    @BGinCHI: I hope this really hammers home to Dole just what his Republican party has become.

  25. 25
    TK-421 says:

    I read a piece about the telecom tech being used to do HFT, and as a telecom veteran I conclude the whole practice is enormously stupid. It’s a pointless arms race (e.g. tunneling your network down so that it’s a straighter line that saves a few millisec), and it’s wasting a lot of money that has nothing to do with investing or being a better clearinghouse. This is an enormously stupid waste of everyone’s resources.

    Tax it, which will make the practice go away. Yes, that means that Wall Street won’t be investing and playing with the latest data/AI/telco toys. So effing what?

  26. 26
    Maude says:

    HFT is hurting regular traders. They get clobbered on every trade.

  27. 27
    burnspbesq says:

    @Phoenician in a time of Romans:

    I bet if you went to the internal documents or even the annual reports of these companies, they’d leave you in no doubt that the reason why they’re paying money for the computers that run high speed trades is because they expect to see a much larger return as a result.

    I’ll take that bet. Go do the analysis, and let us know what you find.

  28. 28
    David in NY says:

    @burnspbesq: I didn’t say it would be easy. It’s just being abused and that ought to be fixed.

  29. 29
    Marty says:

    Actually you wouldn’t need a tax. If you just installed a 100 millisecond delay into every electronic transaction, this problem would go away.

  30. 30
    bemused says:

    @jeff:

    They are sticking up for them because job creators or what?

  31. 31
    Cassidy says:

    I’m not a money or math guy by any stretch, so I understand this whole thing to say that the slower traders are getting sniped by guys with computers? How is this good/bad/ whatever?

  32. 32
    Joel says:

    I’m impressed that Andrei Kirilenko can hold two high-level jobs at the same time.

  33. 33
    Trinity says:

    Hustlers gotta hustle.

  34. 34
    Roger Moore says:

    @MattF:

    So where do you think these profits are coming from?

    The profit is obviously coming from somebody else in the market, but that doesn’t necessarily mean it’s coming from the little guy. I’ve heard people claim that high frequency trading improves liquidity, which is supposed to help the little guy. The people making that claim suggest that the money is mostly coming from the large institutional investors like mutual funds and pensions.

  35. 35
    RareSanity says:

    I agree their should be a tax on HFT. But, just for the sake of completeness, the tax should only be applied to transactions that are not initiated, processed, and completed, by a human being.

    If a human being is capable of trading a stock in millisecond intervals, than they deserve every penny of profit they get, because they are a freak of nature.

    I wouldn’t want to have to pay a transaction tax, just because I bought a few shares of an ETF in my 401(k).

    Point being, there needs to be a human that can be held to account when something goes wrong, and sets off a global financial panic, because of a misplaced decimal point. Institutions should not be able to say, “Our bad…there was a glitch in the software. It’s fixed now”, and that be all there is to it.

  36. 36
    spatula says:

    Once again Cole demonstrates his childishly simplistic understanding of stock markets and gives an opinion based on a seriously flawed article. So much fail. Just stick to talking about your pets and food Cole.

  37. 37
    burnspbesq says:

    @David in NY:

    Well, here’s the thing.

    If you look at the partnership agreement for a typical hedge fund, there’s no flashing neon sign next to the general partner’s priority allocation of capital gain that says “Dear IRS, this is compensatory.” It’s just a priority allocation of capital gain. And if the general partner also gets a fee that’s paid in cash every quarter, and has $50 million or $100 million of his own money in the fund, it becomes considerably more difficult to sort out what portion (if any) of the priority allocation of capital gain is intended to be compensatory. If all of the investors are willing to get up on a witness stand, be put under oath, and tell a consistent story, then the IRS is going to lose this case, regardless of what your and my intuition tell us about what’s going on here.

  38. 38
    Forum Transmitted Disease says:

    What a load of bullshit. I bet if you went to the internal documents or even the annual reports of these companies, they’d leave you in no doubt that the reason why they’re paying money for the computers that run high speed trades is because they expect to see a much larger return as a result.
    __
    “We don’t know they’re earning a profit. They might be forking over millions for their systems as a sort of jolly jape.”

    @Phoenician in a time of Romans: Those of us in the computer industry know that the market for high-speed hardware is no longer physicists or Livermore Labs (for purpose of modeling nuclear/high speed explosions) it’s been the financial houses for almost twenty years.

    They’re also hiring the absolute cream of the crop mathematicians, coders, physicists, network designers. I’m sure all this is to get their email faster, right?

  39. 39
    pathman says:

    This is the wave of the future baby! The Rentiers are going to push for a cashless society so they can skim off every transaction there as well. It’s their world we are just the marks as someone else said.

  40. 40
    BGinCHI says:

    @spatula: We await your analysis of the situation with heavy breathing.

  41. 41
    Maude says:

    @Cassidy:
    Read about the two times HFT traders made mistakes the the market came to a full stop.
    The HFT are for the big accounts, not regular investors.
    Read about how trading works at the exchange.

  42. 42
    Schlemizel says:

    @handsmile:

    I LOVE my Congressman!

  43. 43
    Xenos says:

    @burnspbesq: Have to qgree with this. Transaction taxes turn out to be awfully difficult to make work. I went to a presentation by one of the top tax people at Societé General last night – they may have to get out of the options trading business altogether because the French transaction tax that Sarkozy rammed through is impossible to comply with.

    As long as a transaction tax is designed to do something specific(as opposed to a general policy of ‘punish the banks’) then it might work well. If the problem is high frequency trading of stocks on OTC markets, then just tax those. Now that the latest brilliant idea out of Brussels is to have 2/3s of a transaction tax be paid to the EU itself, god knows how buggered up the result will be.

    The fun part is that they want to tax every transaction involving a European resident, regardless of where the transaction takes place. Think of it as revenge for FATCA.

  44. 44
    burnspbesq says:

    Further to comment 37: there’s nothing inherently wrong with priority allocations of capital gain. I’ve seen approximately a gazillion real estate development partnerships where the partner that contributes the land gets a priority allocation of capital gain equal to the built-in gain (fair market value at the time of the contribution less adjusted basis). You have to do that in order for there not to be a value shift to the service partner when the property is sold (you also have to do it in order for book and tax capital accounts to track correctly, but that’s another story for another time).

    The carried interest problem is a priority allocation of capital gain that is intended as disguised compensation for services. Proving intent is the problem.

  45. 45
    Schlemizel says:

    @burnspbesq:

    So, talk to me like I’m stupid – why should these types of agreements be permitted? Why couldn’t they be forced to separate the two? Would this so harm these god-like job creators (HEY! a screw job is till a JOB!) that they would retreat to Gaults Gultch?

  46. 46
    Amir Khalid says:

    Wait. Now we have spatula and Ted & Hellen? I tell you, this is a bad sign.

  47. 47
    Brachiator says:

    The easiest way to stop this kind of nonsense would be to put a small tax on each transaction

    I’m all for a transaction tax. But it will not stop anything.

  48. 48
    Judge Crater says:

    It’s the “makers” vs the “takers”, baby. It really is amazing how bullshit like high frequency trading is given the blessing of free market, Randian goodness.

    It’s just one more Wall St. scam that benefits the trading exchanges and their parasitic brethren, the HF traders. They justify it as providing “liquidity” to the marketplace. Right.

    And then there are the “dark pools” – where large blocks of stock are bought and sold by private parties – that are, of course, inaccesible to the average investor.

  49. 49
    Schlemizel says:

    @Xenos:

    Why not make it a ‘sales tax’ collected by the exchanges? Then, if they try dodging by going to foreign exchanges deal with that issue separately?

  50. 50
    MattF says:

    @Roger Moore: Well, the profits are not coming from the buy-and-hold investor.

    A better argument is that the profits from HST are just a modern, faster version of what Wall Street has always done to make a profit. Take a bit off the top of every transaction, then go buy that big house in Connecticut or western Massachusetts. Well, great, but if it’s really just a Wall Street-imposed tax on transactions, why shouldn’t the public get a piece of the action?

  51. 51
    Villago Delenda Est says:

    @Alex S.:

    Which is why bailing out the “investment” banks is pretty much the same thing as handing more money to some drunk at the track.

  52. 52
    Xenos says:

    @RareSanity:

    I wouldn’t want to have to pay a transaction tax, just because I bought a few shares of an ETF in my 401(k).

    What if the transaction tax is one basis point? That is nothing compared to your sales load, or the ongoing management fee on your mutual fund. If it takes a lot of volatility out of the market you could end up a lot better off.

  53. 53
    Maude says:

    @Amir Khalid:
    We could use the first to smack the second.

  54. 54
    Ruckus says:

    Everyone knows they are screwing individual investors.
    Not to go all burnsy here(which of course he already did) but we really don’t know that.
    We’re pretty sure they are making good money at this or they wouldn’t be/keep doing it. And it’s a good bet that if they are making good money at it is coming out of someone elses pockets. The pockets to best fleece? Everyone, because how does one check or even know about a little bit being skimmed off the top?

  55. 55
    Villago Delenda Est says:

    @pathman:

    The Rentiers are going to push for a cashless society so they can skim off every transaction there as well.

    This is why, you see, I disagree with Keynes. He talked about a “euthanasia” of the rentiers. I’m for very painful slow deaths of them.

  56. 56
    Cacti says:

    O/T but Senate Repubs have scuttled the UN Treaty on the rights of the disabled, 61 yea, 38 nay.

    They even did it with Bob Dole sitting there in the gallery watching, after coming to the Hill to drum up support.

    Is there any good cause that the GOP doesn’t oppose? Have we finally reached the point where it isn’t shrill to call them just plain evil?

  57. 57
    burnspbesq says:

    @Schlemizel:

    OK.

    At least since 1954, and probably earlier than that, the three fundamental principles of partnership taxation have been (1) partrerships are pass-through entities whose income is taxed only at the partner level, and (2) income earned by a partnership retains its tax attributes (character, source, etc.) when it flows through to the partners, and (3) absent some abuse, the IRS will respect the partners’ agreement as to how to allocate various items of partnership income, gain, and loss among themselves.

    So if a partnership earns long-term capital gain, the partners to whom that long-term capital gain is allocated get to pay tax on it at capital gain rates.

    The carried interest loophole is an absolutely plain vanilla application of these fundamental rules that achieves a result Congress never intended: a priority allocation of capital gain to a partner that performs services for the partnership turns what would otherwise be ordinary income into capital gain.

    There are a number of possible approaches to fixing this, without FUBARing the entire structure of partnership taxation, which generally works OK. The one that I think I like best would determine the fair market value of management services based on external benchmarks, and treat that amount as ordinary income. That’s the way the IRS shut down the subchapter S corporation scam that Newt Gingrich was engaged in.

  58. 58
    lacp says:

    The US did have a transaction tax for a lot of years, but from the little I’ve read about it it appears to have been somewhat different in application (and at a lot lower rate) than what’s currently being proposed. So past history may not have much predictive value.

  59. 59
    Villago Delenda Est says:

    @Cacti:

    OK, I’m way too lazy to go to Thomas and find out for myself, but who were the Ds who voted against this ridiculously common sense treaty? I know while vile sacks of cretinous shit like Rand Paul voted against it, but who were the Dems?

  60. 60
    RSA says:

    @BGinCHI:

    UN Disabilites treaty went down 61-28 today, despite Bob Dole appearing on the Senate floor in support.

    In a wheelchair, from what I’ve read.

  61. 61
    Culture of Truth says:

    I just read that Elizabeth Warren is headed to the Senate Banking Committee. There was a great disturbance felt on Wall Street.

  62. 62
    rlrr says:

    @redshirt:

    Because the traditional investor has access to the resources a high-speed trading firm has…

  63. 63
    lacp says:

    @RSA: Remember when we all thought Dole was conservative? He sounds like Eugene Debs compared to the Republican bozos in office now.

  64. 64
    Lurking Canadian says:

    @Villago Delenda Est: I’m even lazier than you, but don’t treaty ratifications require 2/3 in the Senate? You could have gotten every (d) and a handful of (R) and still lost 61-38.

  65. 65
    Villago Delenda Est says:

    OK, this treaty required a 2/3 majority to ratify, is that the deal? Because all the Nays were GOP scum (to include aforementioned sack of cretinous shit Rand Paul).

    Yes, I broke down and fired up Thomas (strained my fingers doing it, dammit) and there were 38 nays, pretty much every worthless sack of shit in the Senate, every last fucking one of them with an (R) behind their name.

  66. 66
    Maude says:

    @Lurking Canadian:
    I am going to hang my head in shame. I know that and yet it didn’t occur to me.

  67. 67
    MikeJ says:

    Forget a transaction tax. Tell Wall Street that cap gains are being cut to 1%. However, the rate is determined by how long you hold the asset. Less than a minute? Cap gains rate of 250%. 20 years? 1%. That would encourage people to look at investing for the long term.

  68. 68
    MikeJ says:

    @Villago Delenda Est:

    OK, this treaty required a 2/3 majority to ratify, is that the deal?

    All treaties do.

  69. 69
    handsmile says:

    @Schlemizel:

    To be sure, you’ve got one of the best (and one of the most embattled by the “conservative entertainment complex”)! Glad that he had (from my vantage anyways) an easy re-election last month.

    I’m very fortunate as well with my own Congressional representative, Carolyn Maloney.

  70. 70
    Schlemizel says:

    @burnspbesq:

    Thanks – that I understand. What are the odds of anything like that ever happening in Congress? Are there any members talking about this? If I wanted to talk to my Congressman is there a short hand term for this fix?

  71. 71
    Cacti says:

    @Villago Delenda Est:

    OK, I’m way too lazy to go to Thomas and find out for myself, but who were the Ds who voted against this ridiculously common sense treaty?

    Looks like them Dem Caucus was unanimous Yea.

    Repigs were 38 nay, 8 yea, 1 not voting. Yeas were Ayotte, Barrasso, Brown, Collins, Lugar, McCain, Murkowski, and Snowe.

  72. 72
    RSA says:

    @lacp:

    Remember when we all thought Dole was conservative? He sounds like Eugene Debs compared to the Republican bozos in office now.

    The GOP is an escalator to crazytown.

    Here’s Santorum, one of the main opponents to the treaty:

    “The best interest of the child” standard may sound like it protects children, but what it does is put the government, acting under U.N. authority, in the position to determine for all children with disabilities what is best for them. That is counter to the current state of the law in this country which puts parents – not the government – in that position of determining what is in their child’s best interest. Under the laws of our country, parents lose that right only if the state, through the judicial process, determines that the parents are unfit to make that decision. In the case of our 4-year-old daughter, Bella, who has Trisomy 18, a condition that the medical literature says is “incompatible with life,” would her “best interest” be that she be allowed to die? Some would undoubtedly say so.

    But if you actually read the text of the convention (or search for “child” in the text), you find stuff like this:

    Convinced that the family is the natural and fundamental group unit of society and is entitled to protection by society and the State, and that persons with disabilities and their family members should receive the necessary protection and assistance to enable families to contribute towards the full and equal enjoyment of the rights of persons with disabilities… In all actions concerning children with disabilities, the best interests of the child shall be a primary consideration… States Parties shall ensure that a child shall not be separated from his or her parents against their will, except when competent authorities subject to judicial review determine, in accordance with applicable law and procedures, that such separation is necessary for the best interests of the child. In no case shall a child be separated from parents on the basis of a disability of either the child or one or both of the parents… States Parties shall, where the immediate family is unable to care for a child with disabilities, undertake every effort to provide alternative care within the wider family, and failing that, within the community in a family setting.

    No death panels for disabled children; no taking children away from their parents without judicial review; no insensitivity to family and community concerns.

  73. 73
    Villago Delenda Est says:

    I think what needs to happen here is that the 38 who voted against this treaty need to have their spinal cords severed, so they can experience themselves the joy of being wheel-chair bound, and then perhaps for their own selfish dickish reasons they’ll see why that treaty should have been ratified.

  74. 74
    Cacti says:

    @Villago Delenda Est:

    Yes, I broke down and fired up Thomas (strained my fingers doing it, dammit) and there were 38 nays, pretty much every worthless sack of shit in the Senate, every last fucking one of them with an (R) behind their name.

    Every conservadem voted yea on this.

    The GOP has become so extreme, they basically turned and flipped the bird to Bob Dole as he sat in the gallery in a wheelchair.

  75. 75
    RareSanity says:

    Not to go all burnsy here(which of course he already did) but we really don’t know that.
    We’re pretty sure they are making good money at this or they wouldn’t be/keep doing it. And it’s a good bet that if they are making good money at it is coming out of someone elses pockets. The pockets to best fleece? Everyone, because how does one check or even know about a little bit being skimmed off the top?

    @Ruckus:

    I think that there is a misunderstanding of who “the little guy” is.

    People seem to think that an entity called an “institutional investor”, precludes them from being characterized as the little guy. But most institutional investors ARE the little guy. They’re pension funds or mutual funds, that are really just a bunch of little guys trying to work together, for a better result than doing it on their own.

    If HFT trading is skimming money from these institutional investors, then they are skimming money from these groups of little guys. Just because it may not have a significant affect on the dude using E-Trade to buy and sell, doesn’t mean that little guys aren’t affected.

    They are affected by the small amounts skimmed from their transactions, all day, everyday. Over the course of years, we’re talking about some real money here.

    What if the transaction tax is one basis point? That is nothing compared to your sales load, or the ongoing management fee on your mutual fund. If it takes a lot of volatility out of the market you could end up a lot better off.

    @Xenos:

    Agreed.

  76. 76
    MattR says:

    @RSA: What? A ridiculous, misleading argument not based in fact from Santorum? I am shocked.

  77. 77
    Villago Delenda Est says:

    @MikeJ:

    If the invisible hand can’t be gently jawboned into acting rationally, then it’s about time to slap it silly with a clue-by-four.

  78. 78
    Emma says:

    @burnspbesq: Thank you for explaining this. Makes sense.

  79. 79
    Schlemizel says:

    @handsmile:

    If I had Soros money I’d give him a couple of million to run for Prez just to see heads explode! He might benefit from the wingnuts inability to paint Obama as a Muslim. Plus he could offer to take the Presidential oath on Thomas Jefferson’s Koran. That would pop a few veins in foreheads!

    BTW – he is a really good guy in person. The GOP pulled a black man out of the clown car to run against him & the guy tried really hard to let people know that Keith was not a good black man. That worked as well as when Boshwitcz tried to win by telling Jews Paul Wellstone was not a good Jew. Its fun to watch the goopers try to play the race card since they always accuse the Dems of it. Everything is projection with them isn’t it?

  80. 80
    Burnspbesq says:

    @Schlemizel:

    Carl Levin has been fighting the good fight on carried interest for years, but a legislative fix will happen over Chcuk Schumer’s dead body.

    The shorthand is “close the carried interest loophole.” Let the geeks like my former colleagues at IRS and Treasury sweat the technical details. That why we pay them GS-14 salaries plus the location adjustment for DC.

  81. 81
    SatanicPanic says:

    @Cacti: Wasn’t Rick Santorum the head guy lobbying against this? Is there something in the Bible that these guys are interpreting as anti-caring for the disabled? I haven’t been following that closely.

  82. 82
    J. Michael Neal says:

    I’m all in favor of a transaction tax because I think that HFT provides little value and has a lot of downside. That said, a lot of the commentary in this thread betrays a complete absence of knowledge of what is going on here.

    We agree that high-speed trading is profitable, right?

    Not necessarily. I would agree that those who engage in it expect that it will be profitable, but that’s no guarantee that they are correct. I find it interesting the way that a lot of people who really have no idea what’s involved bounce between the idea that, as here, the financial companies are run by geniuses that can find a way to turn an ill-gained profit at everything they touch and the idea that, as at the time Morgan lost billions on some trades, they are nothing but a complete idiots who inevitably screw it up. It can be at most one of these two things, folks, so you really pick one or the other. My take is that it’s neither, but closer to the bunch of fuck-up interpretation.

    So where do you think these profits are coming from?

    My guess is that the bulk of them come from other high frequency traders, and that’s why I question whether the practice is profitable as a whole. It’s certainly profitable for some of those who do it, but I’d bet that they’re mostly just eating the less successful fish in their own pond. There was a study recently that I can’t dig up at the moment that showed that the vast majority of high frequency trades were made with other high frequency traders.

    I would also like to know exactly how Kirilenko has defined “smaller, retail investor.” It’s not clear from the article what contract the paper is talking about as there are several different futures contracts whose price depends upon the S&P500 index. However, the fact that he is talking about futures contracts at all indicates that he is not talking about your average small-time individual investor. My guess is that he’s talking about the CME’s E-mini S&P 500 where the contract specification is for a contract size of about $70,000. You don’t need that much to actually enter into a contract, but it’s not something just anyone is going to do. The people trading these either are, or damned well should be, people who do this professionally. This should also put into perspective the fact that an extra $5.05 of profit on each contract isn’t as large as it sounds.

    Trading has to return to its long-term origins. It should be about investment, not gambling.

    For better or for worse, trading’s origins was primarily as gambling rather than investment.

    HFT is hurting regular traders. They get clobbered on every trade.

    “Clobbered” is a gross exaggeration. For your average individual investor, trading shares of stock rather than futures contracts and placing market rather than limit orders, it would rarely, if ever, cost you more than about five cents a share. That’s not nothing and points to one of the reasons that a transaction tax is a good idea, but it isn’t getting clobbered. In fact, if you are buying shares as a long term investment rather than short term gambling, it should slip under the threshold of significance.

    The reason why it won’t cost you more than that is that HFT only lives within the bid/ask spread of traditional market makers. They can’t make anyone trade outside that range, because a market order will get picked up by the market maker before it happens and the HFT algorithm won’t make a trade. On a high liquidity stock, the kind that most people trade, the spread is often a penny and rarely more than two. As you move away from the big names the spreads get larger and so HFT can scrape out some more profits. However, the reason those spreads are larger is because they’re traded a lot less often.

    It’s also worth noting that the transaction tax as it is usually proposed would only eliminate the ability for HFT to make profits on the symbols with narrow spreads. If the spread is fifty cents, as it can be on less liquid derivative products, a tenth of a cent tax on each share isn’t going to provide much disincentive. Again, though, I wouldn’t worry about that because the people trading that stuff should be able to take care of themselves.

    On the other hand:

    I’ve heard people claim that high frequency trading improves liquidity, which is supposed to help the little guy.

    Yeah, this is what the HFT advocates would like you to believe. In some small ways it happens, since HFT lives within the bid/ask spread and so can provide more liquidity and a better price. In practice, the difference is usually so small that it’s not worth putting up with the headaches of allowing it to live. This is particularly because HFT does not provide liquidity at the moments it’s most needed: when the market is bereft of good information and things are going crazy. Traditional market makers are required to leave their quotes in the market at all times unless trading is halted. (There are a few other times, such as when one has a demonstrable tech breakdown, but not very many.) When everything is going kablooey, the market makers often take a bath but they provide the liquidity for everyone else who wants to make a panic exit or entrance; that’s why things are set up such that under normal circumstances market makers are allowed to make a but of unfair profit, so that they’ll be there when you need them. HFT is under no such obligation to stick around and so, as a former market maker, I resent their attempts to argue that everything they do is okay because they provide liquidity. They should get back to me when they are willing to shoulder the responsibilities of being a liquidity provider.

  83. 83
    Felonius Monk says:

    A little off-topic perhaps, but apparently Dems in the House have filed a discharge petition for tax cuts for the 98%. This will now get interesting.

  84. 84
    Schlemizel says:

    @Lurking Canadian:

    Its nice that we can become a rouge nation based largely on the efforts of a small minority (27%) of the country.

    Not to go all Godwin-y on us but I wonder how much of Germany supported the Nazi Party in 1936.

  85. 85
    Cacti says:

    @SatanicPanic:

    Is there something in the Bible that these guys are interpreting as anti-caring for the disabled?

    Yea, and Jesus turned to the multitude that had gathered, and said, “Verily I say unto thee, fuck the poor, the halt, and the lame, the widow, and the orphan!” “But blessed are the corporations, for they are people my friend.”

  86. 86
    dmsilev says:

    @SatanicPanic: Yep. Santorum’s argument, such as it was, was that ratifying this treaty would inevitably lead to the Evil UN sapping and impurifying our Precious Bodily Fluids.

    I’m simplifying somewhat, but honestly not by very much.

  87. 87
    Schlemizel says:

    @J. Michael Neal:

    You used to do this sort of stuff for a living right? Thanks for the background & please feel free to add additional background.

  88. 88
    Roger Moore says:

    @Forum Transmitted Disease:

    They’re also hiring the absolute cream of the crop mathematicians, coders, physicists, network designers.

    They may think they’re getting the cream of the crop mathematicians and physicists, but I doubt they are. The really great ones aren’t in it for the money, so they see Wall Street as a distinct second best to staying in academia to work on the problems that they find intellectually exciting.

  89. 89

    @RareSanity:
    I’d do the exact opposite: Make it a flat per-transaction tax, and quite a small one (perhaps as low as a few cents), that doesn’t distinguish between the two kinds of trade.

    It also doesn’t “restrict” the HFTers… you want to do a billion trades per second, go right ahead. But you’ll be paying a few million dollars per second in transaction taxes to do so. Better hope those algs spin gold.

    This would rebalance things towards the mere human (less than 15% of trades are done by real live humans these days), and generate revenue at the same time.

  90. 90
    Just One More Canuck says:

    @Cacti: They would be against the UN treaty banning the kicking of puppies

  91. 91
    Cacti says:

    @Schlemizel:

    Not to go all Godwin-y on us but I wonder how much of Germany supported the Nazi Party in 1936.

    The NSDAP peaked at about 43% of the Reichstag seats in 1933. Hitler became Chancellor when they controlled about 37% of the Reichstag, by virtue of a coaltion with the German National People’s Party. After 1933, the Enabling Act was passed, and the Nazis were no longer troubled by any pretense of democracy.

  92. 92
  93. 93
    Just Some Fuckhead says:

    @spatula:

    Once again Cole demonstrates his childishly simplistic understanding of stock markets and gives an opinion based on a seriously flawed article. So much fail. Just stick to talking about your pets and food Cole.

    Are you trying to win the eemom blogcommenting award for excellence or what?

  94. 94
    Chris says:

    @dmsilev:

    And yet again we have the notion that the UN is some sort of anti-American conspiracy despite the fact that we have more power over the organization than any other country and complete immunity from any of its actions via the veto, something every other country not named Britain, France, Russia or China would kill to have.

    Honestly, these people look fucking nuts to us, but imagine how they look to foreigners.

    Particularly people like the Iraqis who’ve actually had a heavy-handed UN boot on their neck in the recent past and know exactly who was behind it.

  95. 95
    Cassidy says:

    @Just Some Fuckhead: Don’t take the bait. Ted beats Helen is the tool kitchen implement we know and love. I think this one is performance art. They do a good impersonation, though.

  96. 96
    MikeJ says:

    @Schlemizel:

    Its nice that we can become a rouge nation

    Just on the cheeks or the nipples too?

  97. 97
    trollhattan says:

    @spatula:
    I have Alan Turing on line three (the one connected to the Great Beyond) who’d like a word:

    “Nice try, but needs moar work.”

  98. 98
    FormerSwingVoter says:

    @BGinCHI:

    UN Disabilites treaty went down 61-28 today, despite Bob Dole appearing on the Senate floor in support.

    I feel like I should point out that there are a lot fewer than 61 Republicans in the Senate. Lots of Democratic Senators are huge assholes too when they think we’re not paying attention.

  99. 99
    trollhattan says:

    @Cacti:
    Are you sure that wasn’t 27%? Because it really needs to be 27%. Everything would just make more sense that way.

  100. 100
    Felonius Monk says:

    @MikeJ:

    Just on the cheeks or the nipples too?

    One or the other if fashionable; both is gaudy.

  101. 101
    Cacti says:

    @FormerSwingVoter:

    I feel like I should point out that there are a lot fewer than 61 Republicans in the Senate. Lots of Democratic Senators are huge assholes too when they think we’re not paying attention.

    Sorry, the Repukes own this one.

    The Dem caucus voted 53-0 in favor. Only 8 of 47 goopers voted for it.

  102. 102
    Punchy says:

    @FormerSwingVoter: I’m thinking 61 voted FOR it. It needed 67 to pass, and so likely all the Dems voted for it and a number of asshole GOPers did the opposite.

    By the way, not only does the GOP not like Obama’s fiscal plan, they also hate their own plan.

    Gunna be hard to hammer out a deal when one side doesn’t even agree with what that side is hammering. Unfuckinreal.

  103. 103
    FormerSwingVoter says:

    @Cacti: Er, belay my last… I somehow read that as 61 voting against it.

  104. 104

    @J. Michael Neal:

    In fact, if you are buying shares as a long term investment rather than short term gambling, it should slip under the threshold of significance.

    For the individual investor keeping total expenses (brokerage fees, research materials, stamps, envelopes … anything related to your investments!) under 2% is the critical threshold here. A few cents per share probably won’t make a big difference. Small investors get eaten up in other ways like buying expensive actively managed mutual funds, or buying a “can’t miss” stock on a “hot tip” from a friend or family member. HFT doesn’t have much effect on most of us.

  105. 105
    Jimmi the Grey says:

    @FormerSwingVoter:

    You know the 61 was the yea (in favor of) and the 38 was the nay (against) right?

  106. 106
    SatanicPanic says:

    @dmsilev: oh jeez.

  107. 107
    Just Some Fuckhead says:

    @FormerSwingVoter: Treaties need 2/3rds majority to pass. This particular one fell short by 5 votes. 38 Republicans voted no. If 5 of those 38 had voted yes, it would have passed.

    7 Republicans voted yes.

    “The opposition was led by tea party favorite Sen. Mike Lee, R-Utah, who argued that the treaty by its very nature threatened U.S. sovereignty. “

  108. 108

    @BGinCHI:

    UN Disabilites treaty went down 61-28 today,

    I can’t wait to hear the convoluted reasons to ever vote against such a thing.

    I’m sure the words “Job Creators!” will be there, somewhere.

  109. 109
    Schlemizel says:

    @MikeJ:

    Spelling was never my strong suit & autocorrect has brought me to ruin. Color be rogue red 8-{D

  110. 110
    Schlemizel says:

    @Cacti:

    Thanks. While I have always wondered about that (I knew they were never the majority) I didn’t know how to find out. Now, after one smart ass comment someone enlightens me.

    I love this place.

  111. 111

    @Just Some Fuckhead:

    “The opposition was led by tea party favorite Sen. Mike Lee, R-Utah, who argued that the treaty by its very nature threatened U.S. sovereignty. ”

    UN Black Helicopters were poised to airlift hoardes of wheelchair-bound commandos directly onto the White House lawn at noon tomorrow. Only Sen. Mike Lee, Asshole(tm) and his merry band of tea-party freedom-fryers saved us all, just in the nick of time!

    Republicans are Broken.

  112. 112
    Mnemosyne says:

    @FormerSwingVoter:

    I feel like I should point out that there are a lot fewer than 61 Republicans in the Senate. Lots of Democratic Senators are huge assholes too when they think we’re not paying attention.

    You forget that this is the new definition of “losing” where a simple majority is not enough to actually win. Kinda like how all of those Senate bills in 2010-2012 “lost” because they had a majority of the votes, but not the supermajority required to overcome a filibuster.

    Every Democrat in the Senate voted FOR the bill. This is all, 100 percent, on the Republicans.

  113. 113
  114. 114
    liberal says:

    @burnspbesq:

    … where the partner that contributes the land …

    Right. That partner created the land, and deservedly earns his keep.

  115. 115
    TG Chicago says:

    I wonder what the downside is to a small tax. I’m not sure how feasible the collection and administration of the tax would be. But other than that, it seems like it would be pretty simple and effective.

    Having bots control the stock market seems awfully scary to me. Remember the Flash Crash? Or that story about Amazon and Borders bots ‘outbidding’ each other constantly to the point that a $70 book was listed at a price of over $23 Million? That’s what will happen on the stock market if we bow to our robot overlords. A bunch of bubbles and busts that will screw up everything.

  116. 116
    PurpleGirl says:

    Since the UN Treaty on Disabilities was largely based on the Americans with Disabilities Act, can we say that the current GOP would be against the ADA? I know part of it was UN, but I can’t help but think it was also that GOP doesn’t want to help people with disabilities.

  117. 117
    liberal says:

    @MikeJ:

    20 years? 1%.

    Why should holding an asset for 20 years necessarily lead to a low tax rate (points about inflation aside)?

  118. 118
    Just Some Fuckhead says:

    @Judas Escargot, Bringer of Loaves and Fish Sandwiches:

    Republicans are Broken.

    Even more so when you consider they had a recent Republican candidate for President, frail in a wheelchair on the Senate floor, urging for passage of the treaty.

    Who ya gonna believe, Bob Fucking Dole or an anonymous rightwing chain email warning about threats to the sovereignty of Murika?

  119. 119
    trollhattan says:

    @PurpleGirl:
    Hey, they already get the best parking spaces, what more could they possibly need!

    /winger from Costanzaville

  120. 120
    Higgs Boson's Mate says:

    Is it possible that the HFTs are fast enough and handling enough volume to create a massive 2010-type Flash Crash before the exchanges’ circuit breakers can kick in?

  121. 121
    MattR says:

    @PurpleGirl: Of course the GOP is against the ADA. Don’t you know it is just one more set of regulations putting an undue burden on the job creators which in turn is preventing them from turning the economy around?

  122. 122
    Forum Transmitted Disease says:

    By the way, not only does the GOP not like Obama’s fiscal plan, they also hate their own plan.

    @Punchy: The TeaTard caucus has made it pretty clear their plan involves a rope and a tree, the money can sort itself about because this IS AMERICA DAMMIT.

    Boehner has the shittiest job in America right now. Couldn’t have happened to a nicer drunk.

  123. 123
    pseudonymous in nc says:

    @Villago Delenda Est:

    OK, this treaty required a 2/3 majority to ratify, is that the deal? Because all the Nays were GOP scum (to include aforementioned sack of cretinous shit Rand Paul).

    That’s the constitutional rule with treaties. And yeah, a treaty that is a carbon copy of the ADA got rejected because Agenda 21! and some chain-email bullshit about home-schoolers.

  124. 124
    liberal says:

    @burnspbesq:
    Sounds like for a lot of that the easier solution is just not tax cap gains differently than wages.

  125. 125
    David Graff says:

    My friend who works as a financial mathematician said that the main thing that High Speed Traders do is act as market makers. In the old days, market makers were major Wall Street firms who would make money on the spread between the buy and sell price of a stock. That is a small trader who wanted to buy a stock worth $50 would have to pay $51, and would only be able to sell it for $49. The market maker accepts the risk that the price will move up or down before they can move that stock on to someone else.

    Thanks to high frequency traders, these spreads have gone way way down to fractions of a cent. They have driven the large banks out of the market-making racket. The high frequency trader algorithms are much better at matching buyers with sellers than some guy holding a telephone. This means that small traders can buy and sell stocks for much closer to the true value of the stock.

    In this case, the “institutional traders” who are being screwed are not buy-and-hold mutual funds but the wall street banks who used to be the market-makers before they were disintermediated. If anything, the mutual funds benefit by being able to buy or sell their stocks at much closer to the true value, without having to give a chunk to the market maker.

  126. 126
    Fair Economist says:

    @Cacti:

    Repigs were 38 nay, 8 yea, 1 not voting. Yeas were Ayotte, Barrasso, Brown, Collins, Lugar, McCain, Murkowski, and Snowe.

    Brown, Lugar, and Snowe are all gone next year, so that leaves us with 6 Republican Senators who aren’t evil (I’ll give Kirk (R-IL), the non-voter, the benefit of the doubt). That’s really bad, and backs up how essential filibuster reform is.

  127. 127
    Linnaeus says:

    No surprise here. That’s capitalism, folks.

  128. 128
    General Stuck says:

    Mitt sighting.

    Mitt Romney went on a MASSIVE (and fiscally responsible) shopping spree at a Costco near his home in La Jolla, CA this week … stocking up on all sorts of goods … including a product MADE IN CHINA!!!

    Read more: http://www.tmz.com/2012/12/04/.....z2E7BHJqHQ

    I saw Mitt Romney chasing a Roadrunner in a golf cart down by the wash today.

    Meep Meep Motherfucker!!

  129. 129
    dmbeaster says:

    @Cassidy:

    I’m not a money or math guy by any stretch, so I understand this whole thing to say that the slower traders are getting sniped by guys with computers? How is this good/bad/ whatever?

    First, realize that 50% or more of all trading is now through HFTs when analyzing the problems it creates.

    In one sense, HFT is simply day-trading on steroids, except that those who employ them are not paying a per-trade charge. At its core, it is basically skimming a small amount off of each trade movement since the HFT in essence barges to the front of the line on any perceived trade movement and takes the first cut. It is highly prone to abuse of trading in a form of inside information since the big employers of the practice use their own knowledge of customers investment behavior to drive the HFTs (think Goldman Sachs). One good rule might be barring HFTs by those who also place trades for others.

    HFTs end up being a small “tax” on the market for the benefit of those who employ them since they give them a trading edge. They serve no particular economic purpose — nothing meaningful would change in the market if they did not exist.

    Probably the biggest concern about them is that they are prone to crashing the market in completely weird and unpredictable ways. The other concern is a general belief that trading practices that favor the insiders are probably not good for the health of the market. Yeah, maybe the skim is small in relation to the whole market, but why allow it?

  130. 130
    redshirt says:

    Drip drip meep meep. I pray to His Mighty Noodlage that every act like this by the Repukes peels just a few more people from their influence, opens just a few more eyes to the depths of their assholishness.

    Maybe?

  131. 131

    Here are the scum voting Nay:

    Alexander (R-TN)
    Blunt (R-MO)
    Boozman (R-AR)
    Burr (R-NC)
    Chambliss (R-GA)
    Coats (R-IN)
    Coburn (R-OK)
    Cochran (R-MS)
    Corker (R-TN)
    Cornyn (R-TX)
    Crapo (R-ID)
    DeMint (R-SC)
    Enzi (R-WY)
    Graham (R-SC)
    Grassley (R-IA)
    Hatch (R-UT)
    Heller (R-NV)
    Hoeven (R-ND)
    Hutchison (R-TX)
    Inhofe (R-OK)
    Isakson (R-GA)
    Johanns (R-NE)
    Johnson (R-WI)
    Kyl (R-AZ)
    Lee (R-UT)
    McConnell (R-KY)
    Moran (R-KS)
    Paul (R-KY)
    Portman (R-OH)
    Risch (R-ID)
    Roberts (R-KS)
    Rubio (R-FL)
    Sessions (R-AL)
    Shelby (R-AL)
    Thune (R-SD)
    Toomey (R-PA)
    Vitter (R-LA)
    Wicker (R-MS)

    (Courtesy, Thomas).

  132. 132
    Schlemizel says:

    @liberal:

    I’d agree with that but I think it unfairly punishes real job creators. You start your small business & build it up, maybe hire a couple of people, business actually thrives & gets bigger. When it comes time to sell or pass on there should be some benefit in addition to inflation protection for that work. Put churning stocks? not so much. As for dividends I could see letting companies pay them out pre-tax & then reporting them as ordinary income. But thats a different bit

  133. 133
    redshirt says:

    @General Stuck: I just saw a photo series that compared/contrasted Romney and Obama campaign materials. All of Obama’s stuff was made in America (by Union shops, no less). All of Romney’s stuff was made in China. Even awesome stuff like buttons that say “We Built This”.

    Again, drip drip. Was there even one Wingnut who looked at the back of their button and said “Hey, wait a sec…”

    Maybe.

  134. 134
    Ksmiami says:

    @rlrr: but individuals should not be in the world of active mgmt… It’s too quick, too expensive and way too risky. Hft is more like least cost routing in telecom whereby big telecom companies make a ton of money finding cheap options… If anything there should be a pay to play fee upfront and collected annually for companies that engage in hft that would help maintain the systems, etc. a transaction tax would hurt the wrong people and be a nightmare to enforce

  135. 135
    Lurking Canadian says:

    @liberal: The argument in favour of special treatment for investment income hinges on the presumption that investment is a good thing. When people have piles of money lying around, we want them to use that money to upgrade their factories, or build a new airport, or expand their broadband service, or whatever they can do that will lead to increases in the output of the economy.

    Somebody who takes his extra money and uses it to build an upgraded network of high-bandwidth cell towers in his hometown is expecting a slow return over a LOOOONG period of time on that money, and that’s the kind of thing we want to encourage. It is for this reason that capital gains are treated differently than income. The investor has tied up his money (which, after all, he could have spent on hookers and blow) in something that will be a net good for the economy as a whole.

    When, on the other hand, the “investment” consisted only of a financial instrument and he “owned” it for less than 100ms, it is hard to argue that there has been any kind of net good for anybody but him.

  136. 136
    The Moar You Know says:

    I saw Mitt Romney chasing a Roadrunner in a golf cart down by the wash today.

    @General Stuck: Sadly, you didn’t. The California coastal roadrunner’s extinct. Used to see ’em around as a kid (I’m about ten miles from Romney’s house, just up the coast). Not a one for over twenty years. Their habitat got built on, their prey got driven out, and they’re all gone.

  137. 137
    pseudonymous in nc says:

    @Fair Economist:

    That’s really bad, and backs up how essential filibuster reform is.

    Filibuster reform doesn’t change the treaties clause, which means that if 34 senators are beholden to chain mail and Faux News and teabagger conspiracy shit, the “UN Treaty For Making Everything In The World Like America” will still go down because it’s the fucking UN.

  138. 138
    Just Some Fuckhead says:

    @General Stuck: You know Mitt has to be aching for his privacy back so he can go back to having illegal Mexicans do all his shit for him.

  139. 139
    KG says:

    @Punchy: the interesting one to me is Hewitt’s now calling for them to adopt Bowles-Simpson. I don’t get it, their own guys on the committee shot it down, I mean, they spent two years slobbering over Paul Ryan, who was responsible for the Commission failing, and now they want to adopt the proposal?

    Seriously, I need to be about +68 to deal with these assholes

  140. 140
    FormerSwingVoter says:

    @PurpleGirl:
    It wasn’t just largely based on the ADA – it is the ADA. It would require literally no change in US law.

    This was voted down exclusively because conservatives believe that cooperation with our allies (and especially the UN) is inherently evil.

  141. 141
    Just Some Fuckhead says:

    @KG:

    the interesting one to me is Hewitt’s now calling for them to adopt Bowles-Simpson. I don’t get it, their own guys on the committee shot it down, I mean, they spent two years slobbering over Paul Ryan, who was responsible for the Commission failing, and now they want to adopt the proposal?

    Blame liberals for not being consistent in what will piss them off on a day to day basis.

  142. 142
    KG says:

    @The Moar You Know: the Greater Roadrunner is still around, see them occasionally. That’s probably what he was after.

  143. 143
    Schlemizel says:

    @KG:
    Depends – was it an ACME golf cart with Acme Supr-Delux rockets taped to the side & was there an anvil in the back?

  144. 144
    Roger Moore says:

    @Villago Delenda Est:

    I think what needs to happen here is that the 38 who voted against this treaty need to have their spinal cords severed,

    Ideally just below the brainstem.

  145. 145
    gene108 says:

    @Just Some Fuckhead:

    a recent Republican candidate for President, frail in a wheelchair on the Senate floor, urging for passage of the treaty.

    Also, too permanently wounded WW2 veteran.

  146. 146
    Ruckus says:

    @RareSanity:
    Thanks for fleshing out what I was saying.
    That’s why I used the word everyone. We all get screwed even if we are not “in” the market at all because the market has been turned into gambling rather than investing, only the house has not just a percentage, they have effectively making up the rules. So now they effectively control/dictate monetary activity and that affects all of us.

  147. 147
    Roger Moore says:

    @Just Some Fuckhead:

    Who ya gonna believe, Bob Fucking Dole or an anonymous rightwing chain email warning about threats to the sovereignty of Murika?

    I don’t think it has anything to do with anonymous email. The underlying problem is that wingnuts hate treaties on general principle. They believe treaties act as a constraint on our God given right to do WTFWW, and thus must be avoided 100%.

  148. 148
    Just Some Fuckhead says:

    @Roger Moore:

    I don’t think it has anything to do with anonymous email. The underlying problem is that wingnuts hate treaties on general principle. They believe treaties act as a constraint on our God given right to do WTFWW, and thus must be avoided 100%.

    The damn thing was negotiated under Bush so someone didn’t use to hate them.

  149. 149
    Just Some Fuckhead says:

    @gene108:

    Also, too permanently wounded WW2 veteran.

    I’m not entirely sure Dole didn’t fake war injuries to himself for political advantage. Maybe there was a time when I wouldn’t have had such scandalous thoughts about our war heros but I’ve been made aware since that these things do happen.

  150. 150
    Platonicspoof says:

    A link from the right side of today’s Calculated Risk describes one HFT strategy for high returns without relying directly on market fundamentals.
    From one of the comments that follow,
    a link to an August zerohedge article about Knight Capital’s version of Hal 9000 buying high and selling low.
    More in the comments.

    I’ve read elsewhere that at these speeds the computers physically closest to the exchanges have the ‘most equal’ access to the market information representing what the other computers are doing.

  151. 151
    JustAnotherBob says:

    I’m having trouble identifying the problem that short term trading causes for the rest of us.

    Say I buy 100 shares in XYZ, Inc. and hold them for ten years and my neighbor buys 100 shares but spends the next ten years trading them back and forth with his buddies, where’s the cost to me?

    They are not extracting anything from the company we own. They’re just playing a zero sum game moving money from one the player’s pocket to another’s pocket. Minus trade cost.

    It’s nothing different than gambling in a cas (gambling house) in which the house doesn’t play but extracts a small amount from the pot on each play.

    What they are doing is not going to change business decisions within XYZ, Inc. They may cause the price of the stock to rise and fall in a smoother curve, but they aren’t driving the worth of the company.

    They might, at worst, wipe out opportunities for XYZ to buy back some shares when things get really undervalued or sell some more if overvalued, but that isn’t how corporations made their profits and grow their capital to any great extent.

    I got no problem with a transaction tax.

  152. 152
    burnspbesq says:

    @liberal:

    Right. That partner created the land, and deservedly earns his keep.

    No, but he (or she) owns it. In case you haven’t noticed, dumbfuck, in our society owning things has consequences.

    Please tell me you’re trolling, and that you’re not as stupid as comments like this make you look.

  153. 153
    David in NY says:

    @burnspbesq: “Proving intent is the problem.”

    I’m a criminal lawyer. The government proves intent every day.

    Anyway, nobody has a right to capital gains treatment, and Congress can limit it any way it likes. Or abolish it. So a fairly arbitrary, but clear, rule would be fine, if Congress’s aim is to prevent widespread abuse.

  154. 154
    burnspbesq says:

    @liberal:

    Sounds like for a lot of that the easier solution is just not tax cap gains differently than wages.

    From a tax administration standpoint, that’s simple. Politically, not so much. And you know that perfectly well. Don’t try to pretend otherwise.

  155. 155
    Phoenician in a time of Romans says:

    @burnspbesq:

    I’ll take that bet. Go do the analysis, and let us know what you find.

    Here you go, just from a quick look – http://www.getcollc.com/what-we-do/getalpha

    “Building A Stronger Platform

    Users of the GETAlpha suite benefit from a combination of co-located, exchange-integrated hardware and software, optimized networking infrastructure and innovative cost protections.

    GETAlpha connects to all public markets and several alternative trading systems to ensure that orders have maximum access to liquidity. Our integrated system of superior co-located hardware, software, and networking tools allows us to process orders and information rapidly, and gives clients extremely low latency executions.”

  156. 156
    JustAnotherBob says:

    (Let’s try it this way…)

    I’m having trouble identifying the problem that short term trading causes for the rest of us.

    Say I buy 100 shares in XYZ, Inc. and hold them for ten years and my neighbor buys 100 shares but spends the next ten years trading them back and forth with his buddies, where’s the cost to me?

    They are not extracting anything from the company we own.

    They’re just playing a zero sum game moving money from one the player’s pocket to another’s pocket. Minus trade cost.

    It’s nothing different than gambling in a cas… (gambling house) in which the house doesn’t play but extracts a small amount from the pot on each play.

    What they are doing is not going to change business decisions within XYZ, Inc. They may cause the price of the stock to rise and fall in a smoother curve, but they aren’t driving the worth of the company.

    They might, at worst, wipe out opportunities for XYZ to buy back some shares when things get really undervalued or sell some more if overvalued, but that isn’t how corporations made their profits and grow their capital to any great extent.

    I got no problem with a transaction tax.

  157. 157
    Paul says:

    @Xenos:

    What if the transaction tax is one basis point? That is nothing compared to your sales load, or the ongoing management fee on your mutual fund. If it takes a lot of volatility out of the market you could end up a lot better off.

    I still don’t understand why someone with a 401k is going to have to pay for this. It is not the 401k or IRA holders or even grandpa with a small brokerage account that is part of the problem. It is instead specialized traders that do this for a living using computers to take advantage of minute spreads in the market. Why not simply forbid that type of trading rather than going after people that haven’t done anything wrong?

    By the way, if the purpose behind a transaction tax is to lower volatility, then why did the 1929 crash happen? We had a transaction tax at that time and we still had volatility.

  158. 158
    Phoenician in a time of Romans says:

    I’m having trouble identifying the problem that short term trading causes for the rest of us.

    Firstly, it’s unfair. It grabs arbitrage for the big guys who can afford the computers and takes the money for that out of the pockets of the little guys. It therefore discourages using stock markets as an investment.

    Secondly, it’s dangerous. Automated trading can increase volatility if the numbers turn in the wrong direction, driving prices up or down based not on value but the seeking of a short-term (i.e. in the order of milliseconds) profit.

  159. 159
    JustAnotherBob says:

    It grabs arbitrage for the big guys who can afford the computers and takes the money for that out of the pockets of the little guys.

    Sure, if you’re a day trader. That’s just a slower speed version of the zero sum game.

    If I hold my stocks for years how do they get money out of my pocket?

    Automated trading can increase volatility

    Markets can be structured to prevent runaway events. And those events only hurt short term traders. A long term investor does not need to sell low right after a computer war.

    Automated trading seeks to make profit out of market noise. Holding long term minimizes the effect of noise, and noise has always been present.

  160. 160

    @burnspbesq:

    From a tax administration standpoint, that’s simple. Politically, not so much.

    Right, but it would be nice if there were a vocal group of Democrats who were constantly and loudly complaining about the unfairness of this. I am not sure that most American voters even know that capital gains are taxed at a lower rate, or how much lower, of how weak the case is that it does anyone but the capital gains taxpayer any good.

    Some issues should be hammered because they establish a brand. Cf. The Republicans who are currently defending low tax rates for the rich.

  161. 161
    Paul says:

    I am not sure that most American voters even know that capital gains are taxed at a lower rate, or how much lower,

    Just for the record, it is only long-term capital gains that are taxed at a lower rate. Short-term capital gains are already taxed at ordinary income rates.

  162. 162
    liberal says:

    @burnspbesq:

    Politically, not so much. And you know that perfectly well. Don’t try to pretend otherwise.

    So? Politically, anything important is difficult.

  163. 163
    liberal says:

    @Phoenician in a time of Romans:
    Yeah, it’s not clear why this is hard to understand: (a) it creates risks of bad things happening, (b) it’s of no social value whatsoever.

  164. 164
    liberal says:

    @Paul:

    Why not simply forbid that type of trading rather than going after people that haven’t done anything wrong?

    Who are these people who are innocent, aw-shucks kind of folks who need to churn their accounts to a degree that they’d suffer considerably from a transaction tax?

  165. 165
    jayackroyd says:

    this is just front running and should be illegal

  166. 166
    Paul says:

    @liberal:

    Who are these people who are innocent, aw-shucks kind of folks who need to churn their accounts to a degree that they’d suffer considerably from a transaction tax?

    I guess the real question is why the need to punish folks who have not done anything wrong, irregardless of what you consider churning their accounts.

    Why should a secretary with a 401k have to pay this charge? Why do you want punish these folks when it is actually specialized funds on Wall Street doing the damage?

    What is the real motive here? To stop HFT or is it some other ulterior motive that has nothing to do with the issue such as raising taxes? Why are you opposed to simply making it illegal to do HFT?

    By the way, I have an uncle who loves to trade his account. It is a small account, but it keeps him busy and he is having fun doing it. I am at a total loss why you would want to treat him the same way as the sleazy funds on Wall Street who are the real bad actors when it comes to HFT.

  167. 167
    Phoenician in a time of Romans says:

    @Paul:

    By the way, I have an uncle who loves to trade his account.

    is he doing it a thousand times a second? Really?

  168. 168
    Paul says:

    @Phoenician in a time of Romans:

    Of course not. But that’s not the issue. I still haven’t gotten an answer as to why people like you are opposed to making HFT illegal. Instead you want to impose a tax on everybody, including the middle class.

  169. 169
    J R in WVa says:

    I have long believed that investments should be required to last some finite and discrete length of time – 60 days at least – under normal circumstances. This would shift the markets from being a gambling enterprise that’s fixed for many players back to being an investment market.

    Not even a, G-d forbid, new Tax. But make everything more stable inherently via a minor rules change.

  170. 170
    Paul says:

    @J R in WVa:

    Amen. This to me is no different than insider trading. It should be illegal when not everybody is abiding by the same rules.

    The one problem I see with a limit of 60 days is what happened with Enron. The employees that held 401ks were at one point forced to hold their Enron stock for two weeks. The reason as I recall was they were in the process of changing plans. Well, as luck would have it, this was the two week period when the Enron stock dropped like rock. There were a lot of employees whose 401ks were wiped out. What happens if there is a 60 day rule and people are not allowed to sell?

  171. 171
    Phoenician in a time of Romans says:

    @Paul:

    I still haven’t gotten an answer as to why people like you are opposed to making HFT illegal. Instead you want to impose a tax on everybody, including the middle class.

    i, We gave you a reason why we want to tax HFT – not make it illegal, tax it.

    ii, Said tax might be crafted to exclude “everybody” and, in any event, would be essentially NOTHING to people such as your (mythical?) uncle – thus the point of the question about whether he trades thousands of times a second. If you taxed every transaction, say, 0.1%, your (mythical?) middle-class investors wouldn’t even notice – but the HFT people sure would.

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