Schaeuble Seeks Decision on EU Financial Transaction Tax in 2016

"Before the rise of HFT, when old school brokers were the ones doing the market making on the trading floor, the difference between the buy and the sell price was about twenty-five times larger than it is today."

The other thing is that HFT firms make less money all together than Goldman Sachs does on its own:

"From 2011 onwards, HFT has been on the decline. In 2009, high-frequency traders moved about 3.25 billion shares a day. In 2012, it was 1.6 billion. Not only did the trade volume decrease, HFT firms profit has also been diminished since its heyday. In 2009, the entire HFT industry made around $5 billion trading stocks. In 2013, this was around $1.3 billion before expenses. Today, HFT companies seem to disappear just as fast as they appeared. Its most notable case might be that of Goldman Sachs selling its HFT department recently. This department, which it acquired in 2000 for $6.5 billion, yielded them a mere 30 million this present day."

The big investment banks hate HFT firms because they have destroyed their spreads on trades. They push out arguments to get rid of them so they can return too the good old days of making sure they get a cut of each trade.

Who pays the Clintons hundreds of thousands for a 'speech'? The investment banks. Not HFT firms, they make too little money and compete too hard.

And if you want an indication of what it could do, have a look over at the italian markets where it has not helped at all. Just recently infact there was a bond issue that was oversubscribed unexpectedly because the trading system gave no indications it could support that, people now actively bypass secondary markets for their main street business.

The tax is even larger than brokerage for shares for retail investors, seriously where will the liquidity come from when its needed?

Except market making is not zero sum.

> they hate financial volatility

Why do you think there would be less noise if the actors get higher costs while trying to converge on prices in the massively distributed system that is the global economy? Have you ever run a distributed database of some kind? Have you ever seen what slow network does to the performance of those?

This sentence in the article makes it sound like they are not specifically going after the causes of the Great Recession, but the finance industry in general, but I'm not sure. In any case, it doesn't seem to be aimed at mortgages at all. Maybe reducing the amount of trading and finance is the point?

Why should financial products be excluded from that?

[1] http://video.albanova.se/arc2016_14.html

As a side note, after listening to this lecture about the inherent instability of markets, the first guy to ask a question is some sort of trader that wonders if there is any way to make "free money" from the theoretical work presented, shows how social issues is always at the forefront of the financial industry.

I imagine the tax would be assessed according to the location of the exchange where the trade occurred, not based on the location of the corporate entity. Relocating to a different region would not affect the tax obligation in this case.

> the financial industry does not create any value through high volume trading, so while there is much to gain for the individual, for us as a society there is nothing positive about it at the risk of higher volatility and rapid market reactions

While the financial sector indisputably creates a large amount of value for the economy, a substantial portion of it is reliant on the ability to trade assets with as minimal friction (i.e. time spent seeking a counterparty, the cost of such a search, and the expense involved in transferring the assets) as possible. High volume traders ensure that liquidity is more available in the market. These traders avoid speculating on the long term value of the asset, as they profit from the bid/ask spread (the price to buy or sell the asset). Ideally, this is as small as possible, which is beneficial to the end users of the asset. With smaller spreads, these traders need to perform more transactions to remain profitable.

In general, we'd like markets to incorporate any material information into the price of assets as quickly as possible, since markets are a mechanism for determining value and associated risk of products. This only occurs if trades actually occur, and there are very rarely buyers and sellers meeting at identical times. Market makers stand in the middle ready to ease this friction by acting as counterparty on both sides. Their role ensures liquidity in the market, which helps minimize the impact of any individual trade. By providing liquidity, these high volume traders generally help reduce market volatility.

Ignoring the previous two paragraphs, one can simply ask, "Why do these entities exist if they add no value? Why would financially sophisticated end users tolerate unnecessary leeches on their profit margins?"

> why should I as someone with 100 GE or EADS shares be against a FTT?

As an individual, you likely purchased those shares through you brokerage for a relatively small commission, which you observed, plus the bid/ask spread, which you likely did not observe. If GE's mid-price is $100, its stock may be trading at $90/$110 or $99.99/$100.01. Clearly you, the individual, benefit from the latter pricing versus the former. A financial transaction tax of 0.1% would simply widen $99.99/100.01 to $99.89/$100.11. I assume you may invest your savings or retirement fund in mutual funds, which charge fees on the order of 0.1% to 0.2%. Due to their need to rebalance their holdings frequently, the fee they assess to you will increase, likely by more than the FTT.

Additionally, you, as an individual investor, benefit from the ability of companies to issue dividends and bonds to fund them. The risks (like interest rate fluctuations) to a company taking such actions are often mitigated by derivatives where the bid/ask spread can be as small as 0.002%. A FTT of 0.01% on these transactions would be 5 times the possible profit on these transactions, removing any incentive, or at a minimum increasing the cost, of making them at all.

My other comment is a bit of a nitpick. I don't think it good sense to implement a new tax on the basis that you don't see good arguments against. I think rather that you need strong arguments for.

This Tax won't apply to all members, just to the ones that opt-in (Austria, Belgium, France, Germany, Greece, Italy, Portugal, Slovakia, Slovenia and Spain seem to be interested). And from what I understand, any revenues steaming from the tax would go to national governments and not the EU budget.

The EU certainly has dropped of the radar, even as far as the AfD is concerned and the EU budget isn't really a point of much discussion and has never been one really.

The AfD is also not looking very healthy at the moment. Their actual policies won't win anyone over and their performance in legislature isn't either. Not to mention that they have massive internal issues. They are currently capturing the protest and racist vote but as the other parties adapt and the fantasy they AfD has created comes into contact with reality, they're numbers will crash.

Additionally much of the EU hasn't shown themselves from their best side in the refugee crisis, at least from a German perspective. Germany itself or Schaeuble anyway has also made it a fetish to reduce debt. Any proposals that slashes EU expenses, especially towards Eastern Europe won't get much criticism. Indeed some might very well think that this is a great idea just to remind everyone exactly what the EU has to offer and why Germany has the power it has.