3 ms·

Thanks, providing constant supply and demand makes sense. On the other hand you only describe consequences of high FTT. If it was something like 0.001 %, it wou

by patall 10y ago

Thanks, providing constant supply and demand makes sense. On the other hand you only describe consequences of high FTT. If it was something like 0.001 %, it would still disrupt HFT but have almost no effect on my trading!? At least that's what I thought it is supposed to do?

consz 10y ago
All trading (up to epsilon error) done by retail and institutional investors is with HFT as a counterparty -- disrupting HFT has direct consequences on the bid-ask spread they're capable of maintaining (in the worst case, they'll have to shut off their market making) and consequently affects the cost of trading for all market participants, not just HFT.
nickles 10y ago
I was addressing your question of how it would affect you, the small, retail investor. Ultimately, any FTT would increase prices of almost every good and service in the economy (oil is traded many times before getting to the pump, debt is perpetually issued to fund capital expenditures, mortgages are resold many times to allocate risk effectively, etc.) You're right in believing that it would disrupt HFT, and that is the intention of the tax. However, my contention is that HFT is, on the whole, beneficial for the financial system, as it improves liquidity and price discovery. Additionally, 0.001% is still larger than you think it is. 0.01% is a unit called a 'basis point'. Many markets (like interest rates and foreign exchange) operate in fractions of a basis point. Also, please reread my previous comment more thoroughly. When I refer to market makers, many (especially in equities) are HFT. You, the retail investor, would immediately see the cost of purchasing stocks increase with a FTT. It would also take longer to execute a trade with fewer market makers (the middlemen you are unknowingly trading with) to provide liquidity on the market.

by patall 10y ago

consz 10y ago

All trading (up to epsilon error) done by retail and institutional investors is with HFT as a counterparty -- disrupting HFT has direct consequences on the bid-ask spread they're capable of maintaining (in the worst case, they'll have to shut off their market making) and consequently affects the cost of trading for all market participants, not just HFT.

nickles 10y ago

I was addressing your question of how it would affect you, the small, retail investor. Ultimately, any FTT would increase prices of almost every good and service in the economy (oil is traded many times before getting to the pump, debt is perpetually issued to fund capital expenditures, mortgages are resold many times to allocate risk effectively, etc.) You're right in believing that it would disrupt HFT, and that is the intention of the tax. However, my contention is that HFT is, on the whole, beneficial for the financial system, as it improves liquidity and price discovery. Additionally, 0.001% is still larger than you think it is. 0.01% is a unit called a 'basis point'. Many markets (like interest rates and foreign exchange) operate in fractions of a basis point. Also, please reread my previous comment more thoroughly. When I refer to market makers, many (especially in equities) are HFT. You, the retail investor, would immediately see the cost of purchasing stocks increase with a FTT. It would also take longer to execute a trade with fewer market makers (the middlemen you are unknowingly trading with) to provide liquidity on the market.