4 ms·

I'd think an easier way to tame the existing stock market would lock all trades in for 90 days. It'd basically eliminate all this short term thinking.

umanwizard 10y ago
What would be the advantages of that?
rm_-rf_slash 10y ago
That would not work in aggregate. Lightning-fast quants would lurch the stock price back and forth every three months, and would require a premium to be paid for the lack of liquidity.
toss1 10y ago
I've long thought that an even better way would be a strong curve in the capital gains tax structure. Currently, if held ,1yr it counts as ordinary income, >1yr gets cap gains treatment of 28%. Better would be something like the following holding periods and tax rates (obviously a mere sketch subject to tuning): <1 minute = 95% cap gains tax rate <1 hour = 80% <1 day = 70% <1 week = 60% <1 mth = 50% <1 qtr = 40% <1 year = 30% <2 yrs = 20% <5 yrs = 10% <10 yrs = 5% >10yrs = 0 The short end would eliminate the volatility, unfairness and flash-crashes created by submillisecond trading. The encouragement to the longer end would get everyone to think longer-term. The 0% for decade+ holdings would prevent a lot of silliness around inheritance (e.g., you inherit a few shares from your grandfather, and have no records or reasonable way to figure the cost basis, but are required to assert one). Of course, I doubt it would happen because it isn't in the short-term interest of the bankers.
- a13n 10y ago
  I like your approach but a 95% tax rate is insane and would cause the market to be incredibly illiquid. Something like 50% to 0% seems a lot more appropriate.
  - toss1 10y ago
    I see why it seems nuts, but then holding a position for less than a minute seems nuts also. That kind of trading is not primarily providing liquidity, its primarily skimming and front-running. IMO, it should probably be banned. However, I think that providing a 95% tax rate is a lighter touch, and allows people to do it if they can find sufficient profit. I also mentioned being open to tuning the amounts. What rate would you think would be good for such short term trading?

umanwizard 10y ago

What would be the advantages of that?

rm_-rf_slash 10y ago

That would not work in aggregate. Lightning-fast quants would lurch the stock price back and forth every three months, and would require a premium to be paid for the lack of liquidity.

toss1 10y ago

I've long thought that an even better way would be a strong curve in the capital gains tax structure. Currently, if held ,1yr it counts as ordinary income, >1yr gets cap gains treatment of 28%. Better would be something like the following holding periods and tax rates (obviously a mere sketch subject to tuning): <1 minute = 95% cap gains tax rate <1 hour = 80% <1 day = 70% <1 week = 60% <1 mth = 50% <1 qtr = 40% <1 year = 30% <2 yrs = 20% <5 yrs = 10% <10 yrs = 5% >10yrs = 0 The short end would eliminate the volatility, unfairness and flash-crashes created by submillisecond trading. The encouragement to the longer end would get everyone to think longer-term. The 0% for decade+ holdings would prevent a lot of silliness around inheritance (e.g., you inherit a few shares from your grandfather, and have no records or reasonable way to figure the cost basis, but are required to assert one). Of course, I doubt it would happen because it isn't in the short-term interest of the bankers.

a13n 10y ago
I like your approach but a 95% tax rate is insane and would cause the market to be incredibly illiquid. Something like 50% to 0% seems a lot more appropriate.
- toss1 10y ago
  I see why it seems nuts, but then holding a position for less than a minute seems nuts also. That kind of trading is not primarily providing liquidity, its primarily skimming and front-running. IMO, it should probably be banned. However, I think that providing a 95% tax rate is a lighter touch, and allows people to do it if they can find sufficient profit. I also mentioned being open to tuning the amounts. What rate would you think would be good for such short term trading?