6 ms·
Raising the financial transaction tax to 0.1%, 1$ per $1000 would eliminate the vast majority of unproductive and rent seeking HFT without negatively effecting
by gnopgnip 3y ago
Raising the financial transaction tax to 0.1%, 1$ per $1000 would eliminate the vast majority of unproductive and rent seeking HFT without negatively effecting liquidity. The US already has an FTT to fund the SEC, implementation should be straightforward. Currently the rate is very low, about 0.002%. Raising the rate would be minimally impactful for longer term investors and generate on the order of $50b a year for the government.
Hong Kong has an FTT of 0.13% currently, it was 0.1% from 1993-2021 so you can compare HFT impacts on these markets. Or compare dozens of other countries with similar rates, Switzerland, Taiwan, France, Italy, Japan.
- paulsutter 3y agodo you have a link, love to learn how it worked out in other places
- gnopgnip 3y agohttps://www.bnymellon.com/content/dam/bnymellon/documents/pdf/emea/global-view-of-financial-transaction-taxes.pdf.coredownload.pdf https://www.bnymellon.com/content/dam/bnymellon/documents/pd... has a good review of several countries laws
- robertlagrant 3y agoWhat's rent-seeking HFT?
- lucubratory 3y agoI'm not that person, but presumably it's that someone has purchased real estate in a geographically relevant location and constructed property on it/between it and the exchange which gives them an insurmountable latency advantage in HFT, and they are characterising the raking in of cash from that latency advantage as rent seeking.
- gnopgnip 3y agoRent-seeking is an "economic activity to gain wealth without any reciprocal contribution of productivity". Or put another way it means societies resources are put towards wealth transfer instead of productivity/wealth creation.
- robertlagrant 3y agoThank you; understood. I've just looked at the Wikipedia definition[0] as well, which is a little different, but I get the point you're making. I haven't thought about this enough, but one thing I'd note is that HFT is risk-taking, and taking a risk generally has the possibility of profit or loss. A second thing would be that the phrase "society's resources" is a bit dangerous, as it might let us think that the money they're using is somehow everyone's money. When in fact they're spending their money on this, hoping to make a profit. [0] https://en.wikipedia.org/wiki/Rent-seeking https://en.wikipedia.org/wiki/Rent-seeking
- nerdponx 3y ago"Excess rent" is economics jargon for something akin to "selling something for more than its fair value". The idea with "rent-seeking" is therefore that of seeking opportunities to take advantage of or even create market distortions that work in your favor, allowing you to capture a greater share of surplus value than you would otherwise obtain in a theoretically-fair market.
- robertlagrant 3y agoHow do HFT firms create market distortions that work in their favour?
- nerdponx 3y agoI'm not making the assertion, I am just trying to clarify the terminology.
- gnopgnip 3y ago
- karkari 3y agoIs the $50b/year figure estimated after assuming the 'unproductive and rent seeking' HFT volume is eliminated?
- gnopgnip 3y agoYes, that estimate is with the greatly reduced HFT volume. And it may not be 100% accurate, HFT and trading in general could move to another market without these taxes and/or switch to a type of derivative with a lower/no tax. Like the UK, for swaps. But these other markets are smaller and not really a replacement. And these other markets may pass similar taxes in the future.