I have confirmed from many sources this is a valid bill. If it is true and they get this passed, we are all done. Trading is no more. I am not on the side of 'Ah, they will never pass that.' I am on the side of in this environment they sure could. Imagine putting this much into something (myself, about 31,000 hours of my life), and having it all be over in a heartbeat because of idiotic legislation. Not to mention that it would, without any doubt in my mind, bring the entire system down. I love to have my entire investment now hanging in the balance, hoping an external factor turns out the way I want. The ultimate 'bad trade' scenario.

http://www.govtrack.us/users/questions.xpd?topic=bill:h111-1068

http://www.rallycongress.com/no2tradertax/1536/


Or just look up H.R. 1068 on Google. Comments welcome.

In case you haven't thought this through, you get hit with a 0.25% tax on the total value (and in futures, this means the total value of the contract, not the margin you pay, so for example, in the ES, the total value at today's close would be $38,950) of the purchase, both coming and going.

So, if you buy one ES contract, the 'round turn' tax would be $194.75 (four points!). You think this is wrong? Not serious? It's deadly serious. I don't know what everyone else out there is doing, but the 'net average' I shoot for in intraday ES, net total of winners and losers, is well under four points. Read my realistic expectations articles and other writings if you don't understand this. If you 'netted', i.e. 'averaged' 4 points per contract per trade, and say you only did four trades per day, you'd net 16 points, or $800, on $5,000 margin (a conservative amount for the ES at 800), or 16% per day! Good luck if you can make 16% a day, but I can't. This tax is so far above anything that could be overcome, intraday, or even swing trading, is done if this passes. Totally done.

Let's say you buy 500 shares of the SPY at $80, and you plan to scalp it out for a nice 0.20 cent trade. The tax costs you $200. You need to average 0.40 just to cover the tax, plus slippage and commissions, just to break even. This isn't your average winner size, this is your average of winners and losers. Do the same calculations as above. Toast if this passes. And with a totally Dem Congress and Prez, it just may...

Thanks for the synopsis, Jim. That is crazy. Wonder how serious they are about it.
I assume Forex is not part of the plan?

Additional links:
http://www.cepr.net/documents/publications/financial-transactions-tax-2008-12.pdf
http://www.greencompany.com/EducationCenter/Greenblog011409.pdf
http://www.greencompany.com/blog/index.php

So, in the UK current short-term stock daytraders are paying a 1.0% 'round turn' tax already? How do they make any money? I know many, many daytraders who trade for a 1% move, or even much less. (For example, an SPY trader trading for 20 cents when the SPY is at 80 is trading for a 0.25% move. The tax alone would require an 80 cent move just for the tax!). The market simply eliminates those traders in the UK? And this doesn't effect liquidity? Any UK traders out there (or anyone with knowledge of this) please elaborate.

And, I see, UK banks are exempt form the tax? So, if we model the UK, as is being proposed, the retail traders will be wiped out, and the scum that started all this mess will be exempt? And this will help the country how?

quote:

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Originally posted by mreiserer

Thanks for the synopsis, Jim. That is crazy. Wonder how serious they are about it.
I assume Forex is not part of the plan?

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So far FX is not mentioned, but many other things are left out, so, as Green said, it may just be we are getting the short list. Besides, I can't take a lot of comfort thinking that we can all shift to the corrupt, unregulated, no CFTC/NFA and no FCM umbrella, fly by night FX game, where any dealer (not to even mention they are trading against you and stealing your stops when it never trades even close to them) can just close and steal your account at any time. I played that game and never intend to again. If I want to trade currencies, I trade futures on an exchange through an FCM, not FX, the most crooked game in town. Just my two cents.

From the first link that BBJ posted it says that the UK stamp tax applies to firms that are incorporated in the UK and only for stocks.

As far as FX goes, I would agree with you, but you can trade it through IB and if you trust them with all the other stuff why not FX? I know that the market is not regulated, but the broker is the same.

I suppose it's ok to post a link to Ray Barros his blog ?
It's about IB.

http://tradingsuccess.com/blog/an-interesting-experience-with-interactive-brokers-263.html

Well, things surely happen with every broker. There is no such thing as a perfect broker.
If there was, there'd only be one left. You can make yourself paranoid about your broker or bank very quickly. All you need is to dig up one negative story, but then you'd have no place to go, because you'll find negative stories involving all of them. I would say it comes down to the odds. Which one has better odds of a) staying in business and b) not messing up
I think IB is ok. I put in calls at odd hours and spoke to IB reps in Switzerland and Hong Kong.
They were both very courteous and professional.

Yeah, look over his recent posts, too, since the above link is quite old.