Posted on 09/11/2020 7:07:49 AM PDT by Theoria
High frequency trading is nothing more than wealthy stock trading firms printing money for themselves at the cost of the stability and appropriate valuation of the overall stock market. Should have been outlawed years ago but when you print your own money, you can use that money to buy politicians.
Several years ago, the French government decided it wasn’t fair that collector’s were making millions of dollars from art bought a century ago for pocket change. They implemented a very small tax on all sales with the intention of benefitting the descendants of artists. Overnight, the entire auction business moved from France to England and the US.
OK, but Chicago?
EXACTLY ... The threat of the move would obviously impact the ability to exact the tax, but the bigger impact is that moving the exchange would obviate the need for major financial institutions to have headquarters near the FORMER exchange. Milliseconds count, and so offices would be relocated to where the new exchange is, which would cost NJ and NY billions in Income Tax revenue, along with decreased property values as thousands of multimillion dollar houses hit the market at the same time.
My thoughts exactly.
I ran the numbers on this when Murphy came out for the tax last week. It does not just affect institutional traders doing high frequency trading. So the populist idea of "big bank bad" and they should pay more taxes is a red herring. (By the way, big banks are bad, but taxes are bad too.) This tax would affect small trading companies, partnerships and some individual investors. It impacts ETFs that must come in line with the underlying securities by market session close (due to regulation.) It affects pension and retirement funds. Just from the basic principles of capitalism it is wrong. It creates a barrier to entry and exit in a market, however so slight. We should always try to steer our markets towards pure competition and taxes get in the way.
I suspect that Murphy was the director of diversity and social justice outreach at Goldman. He doesn't know a damn thing about trading or capitalism.
And a lot of it is just to front-run the real investors, so if they find out I want to buy Apple they can buy it a fraction of a second before me and run up the price by a penny per share. Do that a million times a day and you're talking about real money.
You ever watch CNBC and the floor traders scramble to look like they are doing something when CNBC does a live feed.
Only the most complex of deals are done on the floor, and even when that does happens a sizable part of the deal is done in private - off exchange. That's the nature of mergers and acquisitions these days.
Just about anything other than a mine can be moved elsewhere.
I know of a couple who moved their entire dairy cow herd from upstate New York to Colorado some years ago. after 2 location changes within the state due to urban sprawl & rezoning-—they found new property on Colorado.
The arranged with multiple dairies across the USA to unload, milk their cows, spend the night, milk again in the AM, and resume traveling. I think their herd was at least 300+++ cows. The payment for the overnight was the milk they gave those farmers.
They took 5 days, IIRC, and they did NOT lose a single cow. The logistics of setting up that move stagger my imagination. Timing was critical, as cows get very restless when they are not milked on time.
Sometimes, you just have to vote with your feet....
I was thinking along similar lines, although the distance is a lot closer. Institutional traders have their servers co-located with the exchange servers. Cable distance is measured in feet. I would assume (nasty word) the co-located servers are part of the fail over site in IL and that there are SLA's in place that offer a specified maximum latency. Despite that smaller firms that cannot afford to be co-located get hit the worst.
The real issue is that if NYSE moves the computers, the traders will follow them and NJ will lose the income tax these guys pay to the state. The jobs are very high paid.
OTOH, I doubt the RATs that run the state are smart enough to realize this.
What should the speed limit for trading be?
Kill the goose and then complain it’s not laying any eggs.
(flips light switch in NJ off, and flips another one on in a different state)
They will eventually end up getting chased to Texas or South Dakota.
You saw it with the New York, New Jersey, Connecticut, and Pennsylvania collusion over COVID-19 where these states were setting their own restrictions to keep businesses from crossing lines to avoid them.
Ultimately, all it's going to do is force companies farther away from the Communist Democrat ones.
It's no accident why South Dakota has so much credit card processing.
Or anything else for that matter
Nobody saw that one coming, nope nobody.
The Speed of Light. It's not just a good idea, it's the Law!
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