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financial transaction tax

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  #1 (permalink)
 mosey 
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Europe is trying to get a financial transaction tax passed (10 countries) and it could happen here with a Democratic congress.

Here is what Europe is trying to do for derivitives (I assume futures would be included)

Derivatives account for more than half of the projected revenue, with 6.2 billion euros coming from exchange-traded contracts and 6.1 billion euros from over-the-counter trades, according to documents prepared for a meeting this week of officials from the 10 countries. Those figures are based on a tax rate of 0.01 percent for derivatives. At half that rate, total revenue would dip to 16.6 billion euros, according to the documents seen by Bloomberg.

https://www.bloomberg.com/news/articles/2018-05-14/eu-sees-23-5-billion-in-revenue-from-financial-transaction-tax


Would this be on the notional value of a futures contract? If it ever gets passed here and its on the notional value I guess it would shut down the market. Bernie Sanders, Hillary had it as part of their campaign platform (in different forms) and there's another bill trying to get it here, although no immediate danger.

Does anyone know anything about this - how would it affect us small futures traders?

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  #3 (permalink)
 Obelixtrader 
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mosey View Post
Europe is trying to get a financial transaction tax passed (10 countries) and it could happen here with a Democratic congress.

Here is what Europe is trying to do for derivitives (I assume futures would be included)

Derivatives account for more than half of the projected revenue, with 6.2 billion euros coming from exchange-traded contracts and 6.1 billion euros from over-the-counter trades, according to documents prepared for a meeting this week of officials from the 10 countries. Those figures are based on a tax rate of 0.01 percent for derivatives. At half that rate, total revenue would dip to 16.6 billion euros, according to the documents seen by Bloomberg.

https://www.bloomberg.com/news/articles/2018-05-14/eu-sees-23-5-billion-in-revenue-from-financial-transaction-tax


Would this be on the notional value of a futures contract? If it ever gets passed here and its on the notional value I guess it would shut down the market. Bernie Sanders, Hillary had it as part of their campaign platform (in different forms) and there's another bill trying to get it here, although no immediate danger.

Does anyone know anything about this - how would it affect us small futures traders?

Contract value and from this you would pay 0,01%. They put it now on the side. EU is stupid they still think they can get a lot of money from this FTT but they will never. Sweden in 1980 do the same as what this EU wont and what happend?
Sweden Explains Why A European Financial Transaction Tax Won't Work - Business Insider
GB get brain and they decide to leave eurozone, they done right thing.

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  #4 (permalink)
 tr8er 
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This is a very very old hat, they try it since 10 years and will not come

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 mosey 
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Obelixtrader View Post
Contract value and from this you would pay 0,01%. They put it now on the side. EU is stupid they still think they can get a lot of money from this FTT but they will never. Sweden in 1980 do the same as what this EU wont and what happend?
Sweden Explains Why A European Financial Transaction Tax Won't Work - Business Insider
GB get brain and they decide to leave eurozone, they done right thing.



is contract value same as notional value?

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 Obelixtrader 
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https://www.investopedia.com/ask/answers/042215/how-can-i-calculate-notional-value-futures-contract.asp
Yes

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 SMCJB 
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In the event of a EU financial transaction tax I think you will find that Switzerland immediately becomes the trading hub of Europe. I don't say this flippantly. I believe most if not all European exchanges already have in place a "disaster plan" similar to this.

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 mosey 
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They are trying to ruin us - check out this link about the latest way libtards want to tax us. This posted a day ago on the new wires

https://www.wealthmanagement.com:443/high-net-worth/democrats-target-wall-street-financial-trade-tax-proposal

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 mosey 
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check out this link about the latest way libtards want to tax us. This posted a day ago on the new wires

https://www.wealthmanagement.com:443/high-net-worth/democrats-target-wall-street-financial-trade-tax-proposal

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 SMCJB 
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mosey View Post
check out this link about the latest way libtards want to tax us. This posted a day ago on the new wires

https://www.wealthmanagement.com:443/high-net-worth/democrats-target-wall-street-financial-trade-tax-proposal

libtards???

FYI the article you refrence says
The tax plans come in various forms. Senator Elizabeth Warren of Massachusetts has proposed an annual 2 percent wealth tax on net worth of more than $50 million and Senator Bernie Sanders of Vermont advocates raising the estate tax rate to 77 percent and expand the number of fortunes that would would be liable for the levy.

Niether of which are financial transaction tax's. The two actual references to financial transaction tax's are very outdated.

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 srgtroy 
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A move to the left seems almost inevitable, whether you are for it or not. The wealth disparity in this country has become unbalanced. As Hedge Fund King Ray Dalio currently says, capitalism is not working for a large segment of the population. If you look back in American History, the last 'Gilded Age' was followed by the 'Progressive Era'. I"m not making any personal points here, I just think there is a decent chance that for better or worse, the same cycle will repeat. It certainly didn't help that ten years of a bull market that only benefitted the wealthy was followed by the Tax Cuts that turned into nothing more then corporate welfare at the worst time. The pendulum is going to swing back.

So the question is how far left will we go? We will have to see.

Meanwhile, I've been waiting to see if the Dems start to renew calls for a financial transaction tax. I figured it was only a matter of time:

https://www.bloomberg.com/news/articles/2019-02-06/democrats-target-wall-street-with-financial-trade-tax-proposal.

This is what happens when you have a rigged market that is not allowed to go down but only the wealthy get to play.

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canoekoh
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so if i buy and sell 1 ES contract which has a notional value of $135,000, I have to pay $270 in tax? (0.1% tax)

what?????

so i'd have to go 22 ticks in profit just to break-even? surely that can't be right.

but in the case that FTT actually passes in the US, it should only increase costs for US traders, right? if i am for example, a Singapore citizen, trading through a US futures broker, would the FTT affect me or is it something that's passed along to anyone placing trades through a US exchange?

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 srgtroy 
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canoekoh View Post
so if i buy and sell 1 ES contract which has a notional value of $135,000, I have to pay $270 in tax? (0.1% tax)

what?????

so i'd have to go 22 ticks in profit just to break-even? surely that can't be right.

but in the case that FTT actually passes in the US, it should only increase costs for US traders, right? if i am for example, a Singapore citizen, trading through a US futures broker, would the FTT affect me or is it something that's passed along to anyone placing trades through a US exchange?

I think they are talking primarily about stock/equity trades. I'm not quite sure how they would address leveraged instruments. Some versions of a FTT just want to tax HFTs. Its way too early to know what it would look like in the end.

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 srgtroy 
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A few relevant articles:

Federal Reserve Calls Income Inequality The Biggest Challenge In Next Ten Years

Wealth Concentration Returning To Levels Last Seen Since The Roaring Twenties

Ray Dalio -- Our Biggest Economic, Political, and Social Issue --


I'm not advocating any personal political positions, just trying to figure out where the puck is headed...

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 SMCJB 
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SMCJB View Post
In the event of a EU financial transaction tax I think you will find that Switzerland immediately becomes the trading hub of Europe. I don't say this flippantly. I believe most if not all European exchanges already have in place a "disaster plan" similar to this.

I believe the same applies in the US. The exchanges would move off shore.

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 srgtroy 
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SMCJB View Post
I believe the same applies in the US. The exchanges would move off shore.

Its good to know they have 'disaster' plans, but its hard to imagine the NYSE, NASDAQ & CME moving off shore. I'm sure they would hope that just the threat of moving off shore would be enough to prevent such a tax. At any rate, even if the exchanges did move off shore, wouldn't they find another way to tax traders? Maybe through their brokers? Really, the whole trading ecosystem would have to move offshore. Worst case scenario laws then get passed prohibiting US traders from trading offshore exchanges but I think at that point they would cause the whole system to collapse.

Well, nothing's gonna happen for the next two years at least. Then we'll see.

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 kingjelly 
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https://www.cnbc.com/2019/03/04/house-democrats-reintroducing-financial-services-tax-with-alexandria-ocasio-cortez-as-co-sponsor.html

Daytrading would be over. Copy of the bill at the bottom.

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0,1%GREAT IDEA contract value 150000USD tax will be 150USD.Fool politicians i think they have very high IQ 15

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as FTT news is thrust in front of the public more and more, it will gradually gather momentum and support among the public, whose conception of a FTT amounts to little more than a "extra tax for the rich!"

and it's especially troubling for the US to implement FTT b/c the US often serves as model for other countries in terms of financial regulations.

and what's sad is Wall Street will happily accept FTT b/c they will be the ones to receive exemptions. they have to, unless you want capital markets with no MM aka no liquidity, which no politician is going to want. given how much our pensions are invested in such instruments, you have to give exemptions to Wall Street no matter what.

it's the retail traders that will be absolutely crushed to pieces by this. day after day, Democrats make it harder for me to vote for them even when the alternative is so unappealing.

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 srgtroy 
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I used to think an FTT would never get passed in America, that it was too capitalistic a society, but I don't know anymore. The Fed has turned the market into a racket that essentially dispenses welfare to the rich. Gains are privatized, losses are socialized, and there is a permanent market put. That makes it only a matter of time before those who are unable to get free handouts from the Fed want a part of it. An FTT is one way for them to get that.

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canoekoh View Post
as FTT news is thrust in front of the public more and more, it will gradually gather momentum and support among the public, whose conception of a FTT amounts to little more than a "extra tax for the rich!"

and it's especially troubling for the US to implement FTT b/c the US often serves as model for other countries in terms of financial regulations.

and what's sad is Wall Street will happily accept FTT b/c they will be the ones to receive exemptions. they have to, unless you want capital markets with no MM aka no liquidity, which no politician is going to want. given how much our pensions are invested in such instruments, you have to give exemptions to Wall Street no matter what.

it's the retail traders that will be absolutely crushed to pieces by this. day after day, Democrats make it harder for me to vote for them even when the alternative is so unappealing.

Wall Street will fight it tooth and nail. They told Hillary in 2016 that she would lose their support if she backed the FTT so she dropped it. An FTT that only applied to retail traders wouldn't bring in a dime of revenue.

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Wall Street will fight it tooth and nail. They told Hillary in 2016 that she would lose their support if she backed the FTT so she dropped it. An FTT that only applied to retail traders wouldn't bring in a dime of revenue.

Possibly, but banks and hedge funds can simply buy/sell otc total return swaps if worse comes to worst with which they would pay 0% FTT given how these artificial instruments are structured. And this is just 1 example. Finding ways around the law is their specialty, especially with the army of lawyers from Cravath, Wachtell, Sullivan Cromwell, DPW, Skadden that specialize in these things.

It's more likely they wouldn't even need to find loopholes since the final bill itself would have to include exemptions for banks/funds, as mentioned before. No politician, not even AOC, would want to create a situation in which markets are extremely illiquid with wide spreads, causing chaos in the portfolios and pensions of everyday Americans due to the volatility. The #1 issue for any politician is always going to be the economy. Because if the economy is doing well, politicians can honestly get away with a lot of shit b/c the general populace really don't give too much of a shit about reigning in their representatives as long as they're getting paid, fed, and their desires satiated.

And even if, like you said, this would lead to no revenue being brought in, I'm pretty sure Democrat politicians like AOC care more about just getting it passed, b/c it demonstrates to the public that they're "for the people, against the rich." It's more about optics than nuance.

When's the last time you saw politicians pass a nice-sounding bill with all the populist bells and whistles and when the bill didn't turn out the way it should have, they admitted their mistake and voted to overturn it? (hint: never i.e. *bamacare)

Bills are hard to pass but once they do, it's even harder to overturn them. Politics 101 is basically to never apologize and admit past mistakes, especially in this day and age of doubling down. This goes for both sides, but esp the Republican side.

This trend of increasing populism is partially the wealthy's fault. One cannot deny that the ridiculously increasing wealth gap in the US and globally has been due to the top 0.01%'s greed squeezing out the middle class. Can you really blame the average folks making 30-50k a year for believing in the premises of this bill and supporting it? The top 0.01% continue to bite the hand that feeds them and people are losing hope and think erroneous platforms like Bernie/AOC are proposing are the real solution.

Personally, the best solution would be to enact a high estate tax. FTT and too high capital gains tax hurt capitalism and the economy (and us retail folks). 70% highest bracket tax on personal income is just pure stupidity since almost no one making that much earns it from personal income.

A high estate tax for high income brackets means the gov't isn't going to tax-rape you while you're alive so you still get to enjoy all the QoL that comes from successfull capitalism. You will still be able to pass along millions to your children, instead of billions. I am not a major fan of generational wealth, as it only exacerbates wealth gaps in society.

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 srgtroy 
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canoekoh View Post

This trend of increasing populism is partially the wealthy's fault. One cannot deny that the ridiculously increasing wealth gap in the US and globally has been due to the top 0.01%'s greed squeezing out the middle class. Can you really blame the average folks making 30-50k a year for believing in the premises of this bill and supporting it? The top 0.01% continue to bite the hand that feeds them and people are losing hope and think erroneous platforms like Bernie/AOC are proposing are the real solution.

Personally, the best solution would be to enact a high estate tax. FTT and too high capital gains tax hurt capitalism and the economy (and us retail folks). 70% highest bracket tax on personal income is just pure stupidity since almost no one making that much earns it from personal income.

A high estate tax for high income brackets means the gov't isn't going to tax-rape you while you're alive so you still get to enjoy all the QoL that comes from successful capitalism. You will still be able to pass along millions to your children, instead of billions. I am not a major fan of generational wealth, as it only exacerbates wealth gaps in society.

Agree with you on all this. Problem is once the pendulum swings all the way in one direction, it tends to swing back way past the balance point and all the way in the other direction.

From what I've read, those pushing for a financial transaction tax have their eyes fixated on high frequency trading first and foremost, not realizing that without the HFTs, liquidity and volatility would both become huge problems, as HFTs are the new market makers.

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 SMCJB 
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Years ago a lot FTT talk was anti-HFT in nature. Now it seems to be aimed a lot more at 'Wall Street' and the people perceived to have the money. I think their goal will be to tax and reign in the excess and not destroy the capital markets. Obviously even a tiny tax applied to everyone would cause many markets to grind to a halt, and liquidity in all other markets to dry up considerably. So if we assume they don't want that to occur, there has to be exceptions. Question is who would get those exceptions? Market makers? Swap Dealers/Banks? Pension Funds? ECPs? Still don't think it happens, and even if it does most of the trading goes off shore.

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 SMCJB 
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Hey @xplorer. I saw you closed the duplicate FTT thread. Any chance you can move this one out of the Currency section and into a location more visible?

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Hey @xplorer. I saw you closed the duplicate FTT thread. Any chance you can move this one out of the Currency section and into a location more visible?

Threat moved to Traders Hideout.

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NYSE, NASDAQ & CME moving off shore.

look at the growing volume in the CFD marked .

Let me quote Wikipedia : They were initially used by hedge funds and institutional traders to cost-effectively hedge their exposure to stocks on the London Stock Exchange, mainly because they required only a small margin. Moreover, since no physical shares changed hands, it also avoided the stamp duty in the United Kingdom.

so if any tax is coming NYSE, NASDAQ & CME will be the biggest looser and welcome the CFDs
(anyway the best choice if you are not in the US)


I think you can put NYSE, NASDAQ & CME into the museum even without tax cuts!

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The entire industry will, at a minimum, cite the failed Swedish implementation of a transaction tax; bond trading fell 85%, futures trading fell 98%, options market completely died. And this was in the first week after the tax went into effect. It was repealed about 6 years after implementation. The devastation to the industry was widespread. Revenues from the tax were less than 10% of what was forecast.

Expect every exchange, broker, and intermediary in all asset classes to fight tooth and nail. There's just too much to lose. Libs, particularly one from Oregon, have been floating this stupid idea for 10 years never getting any real traction.

My prediction; the more traction this stupid idea gains, the harder the industry will fight back. Targeted exemptions won't be enough to satisfy those exempt because everyone has something to lose should a transaction tax be implemented. The idea should be a non-starter but in the current political climate with its oppossing income inequality-socialism saves theme, the far leftists in the Democratic party think it's an idea whose time has come.

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 paco 
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AOC really should be shamed for presenting this as HER's - and no I don't want to fight her name is all over the news .

The Transaction tax web page from congressional budget office.
2016 https://www.cbo.gov/budget-options/2016/52287
2018 https://www.cbo.gov/budget-options/2018/54823

There is a 2011 USELESS response by a Senator --this has been on deck for years.
Futures.io has had this discussion before and there were detailed conclusions the last time

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 srgtroy 
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SMCJB View Post
Years ago a lot FTT talk was anti-HFT in nature. Now it seems to be aimed a lot more at 'Wall Street' and the people perceived to have the money. I think their goal will be to tax and reign in the excess and not destroy the capital markets. Obviously even a tiny tax applied to everyone would cause many markets to grind to a halt, and liquidity in all other markets to dry up considerably. So if we assume they don't want that to occur, there has to be exceptions. Question is who would get those exceptions? Market makers? Swap Dealers/Banks? Pension Funds? ECPs? Still don't think it happens, and even if it does most of the trading goes off shore.

Some on the extreme left probably do want to destroy the capital markets and others may want to reform them but have no idea what they are actually doing and could destroy them by accident (as was done in Sweden). I think HFT is a convenient target to zero in on but I agree the sentiment has now become broader. Ultimately, this is all part of a movement to restore some balance to wealth distribution in a country that has seen its middle class hollowed out by US corporations using foreign labor. Luckily, there are easier and less technical ways to do that then the FTT, so you may be right that the FTT never happens. If they couldn't pass it immediately after the Great Recession, they may not be able to pass it now. On the other hand, wealth distribution has only gotten worse since then.

Exchanges moving offshore sounds like a great solution, but is it really practicable? Will laws not be passed to find a way to prevent trading offshore exchanges. Of course, I suppose one could always get vps (and bank account) overseas and then we start getting into a whack-a-mole situation. In the long-term, I think @carofa may be right but that is not going to happen overnite.

Its disturbing when you have people like Robert Reich openly advocating for an FTT. This is from Senator Brian Schatz' twitter feed. He is the one introducing the FTT tax bill in the Senate, not that it will ever see the light of day there for now:


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 steve2222 
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xplorer View Post
Threat moved to Traders Hideout.

I wish the 'threat' of a FTT had been moved

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DmanX
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Food for thought:

The US has the largest active retail brokerage business in the world. A FTT at current proposed rates will have an impact. The retail futures brokerage business would vanish overnight with a FTT at 0.1% of notional value.

Ex. ES @2750.00 x $50 = $137,500 in notional value x .001 = $137.5 FTT, per side. RT = $275 or 22 basis pts.

At that rate, the entire futures market eco-system would be destroyed. Simple metrics like this will be brought up in any debate and lobbying effort. Most countries that have a FTT in place, levy a lower tax rate on derivatives than on equities.

If the goal is to 'lower volatility' but maintain the US's competitive edge and global market dominance, there could be an implementation of a tax on HFT (high frequency trading) generated by computer algorithms in the same vein that France does it. A rate of .01%, which is unnecessarily high, would tamp down on HTF to a significant degree. So much so, it would be expected that volumes would be cut by about 40% and volatility to increase north of 25%. However, a rate of .001% would be manageable and progressive enough to balance revenue generation without dramatically reducing liquidity.

We will be under threat of a FTT for the foreseeable future. The bright spot in all this is that the US financial sector has more political clout and lobbying dollars than perhaps any other sector. It might be 'hip' for certain lawmakers to play the 'soak the rich' card. But when it comes down to it, the campaign contributions from the financial sector give pause for 'reasonable' compromise.

Prediction:

Futures: 0.001% to 0.005% per side *or* a flat rate per side/per contract (much like the NFA fee)
These lower rates would likely accompany an increase in the capital gains rate or even an adjustment to the 1256 60/40 rule to something like 50/50 or 40/60.

FTT for futures at 0.001% to even as much as 0.0025% are 'manageable' for traders.

ES @2750.00 x $50 = $137,500 in notional value x .0001 = $1.375 FTT, per side. RT = $ 2.75
ES @2750.00 x $50 = $137,500 in notional value x .00025 = $3.4375 FTT, per side. RT = $ 6.875

We have 2 to possibly 6 years to have to worry about any of this. But I'm fairly certain that an American FTT would be quite different rate-wise than an EU zone FTT.

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 srgtroy 
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Elizabeth Warren's Financial Transaction Tax Proposal (to help pay for her Medicare For All):

"Impose a tax on the purchase of most stocks, bonds, and other debt obligations of 0.1 percent of its value and on the purchase of derivatives of 0.1 percent of all payments made under the terms of the derivative contract. Estimated to raise $800 billion from 2020-2029."

I'm not sure what "0.1 percent of all payments made under the terms of the derivative contract" means. I assume she is referring to notional value. Anyone have a different interpretation?

I'm not sure you would ever get 60 Senators to vote for this (50 + filibuster). I'm not even sure you would ever get 50 Senators to vote for this if they do away with the filibuster but that would certainly be a closer vote.

At any rate, there are certainly Wall Street excesses that need to be addressed like CEO pay and buybacks, but this is throwing the baby out with the bath water.

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 SMCJB 
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Yeah I saw that. I know the target of this is "the greed on Wall Street", "excessive speculation" and "all the Billionaires can afford to pay this small fee" but this would be devastating on so many business's, not just Wall Street. I wouldn't be surprised if all the pension companies, and even unions came out against it. As I've said before though, if enactaed I think you'll find that most if not all exchanges already have an 'off-shore' plan to avoid it. I believe when the EU was discussing it, they were all looking at moving everything to Switzerland to avoid it.

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 srgtroy 
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SMCJB View Post
Yeah I saw that. I know the target of this is "the greed on Wall Street", "excessive speculation" and "all the Billionaires can afford to pay this small fee" but this would be devastating on so many business's, not just Wall Street. I wouldn't be surprised if all the pension companies, and even unions came out against it. As I've said before though, if enactaed I think you'll find that most if not all exchanges already have an 'off-shore' plan to avoid it. I believe when the EU was discussing it, they were all looking at moving everything to Switzerland to avoid it.

Speaking of the EU, it looks like they are still trying, but have watered their FTT down significantly:

https://www.reuters.com/article/us-eu-ecofin-tax/eu-tries-to-revive-plan-for-financial-transaction-tax-idUSKCN1TF1OG

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 SMCJB 
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And if Brexit happens it would all move to London!

From the article
It is less ambitious that the original plan covering derivatives and other financial instruments.
and
Initial public offerings, market making and intraday trading would also be exempt.

With regards to the last point, I've always thought there would end up being lots of exceptions, question is can you qualify for one!

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 SMCJB 
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WSJ:- Germany Pushes Forward on European Financial Transactions Tax

https://www.wsj.com/articles/germany-pushes-forward-on-european-financial-transactions-tax-11576074482

Under a new blueprint for the tax, sent by Germany Finance Minister Olaf Scholz to the other governments on Monday and seen by The Wall Street Journal, anyone buying shares in large companies domiciled in those countries and with a market value of over €1 billion ($1.1 billion) will have to pay a minimum 0.2% tax over the transaction value.

No levy would be imposed on initial public offerings, market making, share buy backs and purchases by pension funds.

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canoekoh
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SMCJB View Post
WSJ:- Germany Pushes Forward on European Financial Transactions Tax

https://www.wsj.com/articles/germany-pushes-forward-on-european-financial-transactions-tax-11576074482

Under a new blueprint for the tax, sent by Germany Finance Minister Olaf Scholz to the other governments on Monday and seen by The Wall Street Journal, anyone buying shares in large companies domiciled in those countries and with a market value of over €1 billion ($1.1 billion) will have to pay a minimum 0.2% tax over the transaction value.

No levy would be imposed on initial public offerings, market making, share buy backs and purchases by pension funds.

so it's as we feared - market-making prop firms/banks will get exemptions and retail traders will get killed.

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 Daytrader999 
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canoekoh View Post
so it's as we feared - market-making prop firms/banks will get exemptions and retail traders will get killed.

Well, this applies only to stocks, not to any derivatives / other financial instruments.
For example, if you buy stocks for $1,000, you'll have to pay $2(!) in tax on the purchase.

So, IMHO this proposal is quite useless in regards to 'fight' those bad speculators...

But, on the other hand, once such a regulation is established, there will always be room for extending it to other financial products.

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AceRoth
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Wonder if the drop in CME seat prices is related to odds of transaction tax passing going up. They’ve been in downtrend for years but sharper drop last month or so.

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 SMCJB 
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This is worse than a transaction tax. Already passed but not in effect to 2021. Financial Armageddon for German Traders.

https://financial-hacker.com/the-scholz-brake-fixing-germanys-new-1000-trader-tax/

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canoekoh
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SMCJB View Post
This is worse than a transaction tax. Already passed but not in effect to 2021. Financial Armageddon for German Traders.

https://financial-hacker.com/the-scholz-brake-fixing-germanys-new-1000-trader-tax/

indeed there were already multiple threads going crazy about it on elitetrader.

too many ppl saying that our fears of FTT are overblown when it's just not true.

if you think the US is an exception since we're different from those "socialist Euro-cucks", it only takes the presidency and the senate to turn blue this november for something like this to happen state-side, since the democrats have free reign to pass whatever legislation they want once they have control of both the house and senate + presidency.

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Since there are new discussions about FTT, I would like to understand exactly what is coming up.

What does it actually mean when people demand that there should be a tax of 0.01% on derivatives?

I do short-term trading in the FDAX. My instructor always said that on average you should have at least 3 points per trade.

Let's say I buy 1 contract FDAX and sell 3 points higher - that is 75 € gross.

minus fee 2,40 € fee
minus 0.01% tax from what? 13.300 x 25€ ? That means 33,25 € ?
--------------------------------------
35,60 € intotal
That means: The first 1.5 points !that is 50%! are costs and taxes?

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canoekoh
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Willbur View Post
Since there are new discussions about FTT, I would like to understand exactly what is coming up.

What does it actually mean when people demand that there should be a tax of 0.01% on derivatives?

I do short-term trading in the FDAX. My instructor always said that on average you should have at least 3 points per trade.

Let's say I buy 1 contract FDAX and sell 3 points higher - that is 75 € gross.

minus fee 2,40 € fee
minus 0.01% tax from what? 13.300 x 25€ ? That means 33,25 € ?
--------------------------------------
35,60 € intotal
That means: The first 1.5 points !that is 50%! are costs and taxes?

it's 0.01% of the notional value of the contract. and importantly, it's applied per-transaction.

to take your example, FDAX's current notional value is 326125 euros for 1 contract.

0.01% is 32.61 euros.

since FTT is applied per transaction, the 0.01% FTT is applied for both opening and closing transaction.

so opening and closing 1 FDAX futures contract will incur 65.22 euros in FTT + commissions + fees...so around 70 euros.

that's why ppl say that FTT is basically a death sentence for daytraders b/c it'll render it obsolete. remember even after subtracting FTT + commissions + fees, if you still manage to eke out a profit, you get taxed 30-50% of that profit through capital gains tax depending on your country's tax laws. even for swing traders, it's a big ass burden.

you Europeans, especially Germans after their latest tax change, need to get your heads out of your asses and realize how badly you're getting fucked in the name of "social democracy." especially since FTT legislation released so far all seem to provide exceptions for market makers. so basically prop/hedge funds like Citadel get to evade FTT while the rest of us plebs are screwed over.

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 tr8er 
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Willbur View Post
Since there are new discussions about FTT, I would like to understand exactly what is coming up.

What does it actually mean when people demand that there should be a tax of 0.01% on derivatives?

I do short-term trading in the FDAX. My instructor always said that on average you should have at least 3 points per trade.

Let's say I buy 1 contract FDAX and sell 3 points higher - that is 75 € gross.

minus fee 2,40 € fee
minus 0.01% tax from what? 13.300 x 25€ ? That means 33,25 € ?
--------------------------------------
35,60 € intotal
That means: The first 1.5 points !that is 50%! are costs and taxes?


the 0.01 % tax is an old hat, you just have to click the first link on page 5 of this thread and you will be surprised I never saw such a stupid idea

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 steve2222 
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The EU are not going to let this go ... nutters.
Watch all the activity move to London (or Asia) ... The UK will be glad they are out of the EU.

https://www.cityam.com/angela-merkel-seeks-to-impose-financial-transactions-tax-on-eu-countries/

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 ReximusMaximus 
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steve2222 View Post
The EU are not going to let this go ... nutters.
Watch all the activity move to London (or Asia) ... The UK will be glad they are out of the EU.

https://www.cityam.com/angela-merkel-seeks-to-impose-financial-transactions-tax-on-eu-countries/

If this happened in the US, what would the options be for US traders?

From what I've seen the tax still applies to US citizens abroad.

So would that mean that we'd have to become a Canadian or UK citizen and relocate and trade on those exchanges?

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 SMCJB 
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Just reading the Wall Street Journal and their discussion on What Kamala Harris Means for Wall Street and Silicon Valley

Wall Street is happy about the signal it sends. Ms. Harris was the moderate choice among more left-leaning candidates who may have taken a tougher line on finance firms. That said, during her presidential primary campaign, Ms. Harris said that she would pay for her health care plans with taxes on financial transactions: “I would tax Wall Street stock trades at 0.2 percent, bond trades at 0.1 percent, and derivative transactions at 0.002 percent.” Mr. Biden has expressed some support for the idea of those taxes, but not as explicitly as his running mate.

.002 percent on
@ES at 3372 would be $6.74 (hence $0.67 on MES)
@CL at 42.60 would be $0.85
@GC at 1940 would be $3.88
@GE at any price would be $20
@BTC at 11650 would be $1.16

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 Daytrader999 
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SMCJB View Post
Just reading the Wall Street Journal and their discussion on What Kamala Harris Means for Wall Street and Silicon Valley

Wall Street is happy about the signal it sends. Ms. Harris was the moderate choice among more left-leaning candidates who may have taken a tougher line on finance firms. That said, during her presidential primary campaign, Ms. Harris said that she would pay for her health care plans with taxes on financial transactions: “I would tax Wall Street stock trades at 0.2 percent, bond trades at 0.1 percent, and derivative transactions at 0.002 percent.” Mr. Biden has expressed some support for the idea of those taxes, but not as explicitly as his running mate.

.002 percent on
@ES at 3372 would be $6.74 (hence $0.67 on MES)
@CL at 42.60 would be $0.85
@GC at 1940 would be $3.88
@GE at any price would be $20
@BTC at 11650 would be $1.16

That's VERY moderate compared to the transaction tax which is (planned) to be imposed on any derivatives in Germany starting from 2021....

I'd immediately subscribe to this.

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 ReximusMaximus 
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SMCJB View Post
Just reading the Wall Street Journal and their discussion on What Kamala Harris Means for Wall Street and Silicon Valley

Wall Street is happy about the signal it sends. Ms. Harris was the moderate choice among more left-leaning candidates who may have taken a tougher line on finance firms. That said, during her presidential primary campaign, Ms. Harris said that she would pay for her health care plans with taxes on financial transactions: “I would tax Wall Street stock trades at 0.2 percent, bond trades at 0.1 percent, and derivative transactions at 0.002 percent.” Mr. Biden has expressed some support for the idea of those taxes, but not as explicitly as his running mate.

.002 percent on
@ES at 3372 would be $6.74 (hence $0.67 on MES)
@CL at 42.60 would be $0.85
@GC at 1940 would be $3.88
@GE at any price would be $20
@BTC at 11650 would be $1.16

Thanks for sharing that.

I saw her 0.002% rate for derivatives and looked around at other proposals both domestically and internationally and some of them are so onerous that they would shut us down completely.

If we had to have an FTT I could live with this, however I'd be concerned about it going up in the future.

The extent of the cascade affect of destroying short term trading would be difficult to predict. The first thing I'd imagine would be huge spreads and a large increase in volatility due to the sudden lack of participants.

If it were up to me, I'd assume that taxing gains would make more sense, in particular perhaps a change to section 1256 would be more reasonable. If the FTT goes too high, their forecasted tax revenue had better account for a severe drop off in trading volumes. At least reform to 1256 would not hinder participation/liquidity etc.

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 ReximusMaximus 
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That's VERY moderate compared to the transaction tax which is (planned) to be imposed on any derivatives in Germany starting from 2021....

I'd immediately subscribe to this.

Does the planned German transaction tax apply to you if you are a German citizen trading on a US exchange like the CME?

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 SMCJB 
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ReximusMaximus View Post
If it were up to me, I'd assume that taxing gains would make more sense, in particular perhaps a change to section 1256 would be more reasonable. If the FTT goes too high, their forecasted tax revenue had better account for a severe drop off in trading volumes. At least reform to 1256 would not hinder participation/liquidity etc.

Can't quote source but I believe that one of Biden's suggestion is to make all capital gains taxed as income. The elimination of a lower taxed Long Term Capital Gains rate would eliminate Section 1256 (assuming you mean the 60/40 rule).

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 Daytrader999 
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ReximusMaximus View Post
Does the planned German transaction tax apply to you if you are a German citizen trading on a US exchange like the CME?

Yes, the tax applies independent of the location of the transaction or exchange, it will apply to all transactions as long as you're mainly located in Germany (means as long as you have to pay taxes in Germany).

It's quite complicated and probably against constitutional law, but apparently they plan to impose it first and deal with the lawsuits later....

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 ReximusMaximus 
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SMCJB View Post
Can't quote source but I believe that one of Biden's suggestion is to make all capital gains taxed as income. The elimination of a lower taxed Long Term Capital Gains rate would eliminate Section 1256 (assuming you mean the 60/40 rule).

Yes I was referring to the 60/40 rule.

I would hope that if a measure like eliminating LTGC were to go through that the FTT would either be minimal or preferably nonexistent.

I totally accept the reality of paying the taxman, but have a hard time swallowing the elimination of short term trading through onerous FTT rates. The rate Harris has suggested wouldn't destroy trading, but there are others out there that want rates that would. I can't imagine doing anything other than trading for a living, just can't even picture it.

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 SMCJB 
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@ES at 3372 would be $6.74 (hence $0.67 on MES)
@CL at 42.60 would be $0.85
@GC at 1940 would be $3.88
@GE at any price would be $20
@BTC at 11650 would be $1.16


ReximusMaximus View Post
Yes I was referring to the 60/40 rule.

I would hope that if a measure like eliminating LTGC were to go through that the FTT would either be minimal or preferably nonexistent.

I totally accept the reality of paying the taxman, but have a hard time swallowing the elimination of short term trading through onerous FTT rates. The rate Harris has suggested wouldn't destroy trading, but there are others out there that want rates that would. I can't imagine doing anything other than trading for a living, just can't even picture it.

I agree definitely not as bad as some proposals. I've always assumed that there would be exemptions. $13.48 per round turn tax on ES would really hurt market makers (and HFT) and would probably mean less liquidity on the inside market. $1.70 in CL is still small. $40 RT on GE/Eurodollars is more than a tick!

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 addchild 
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SMCJB View Post
I agree definitely not as bad as some proposals. I've always assumed that there would be exemptions. $13.48 per round turn tax on ES would really hurt market makers (and HFT) and would probably mean less liquidity on the inside market. $1.70 in CL is still small. $40 RT on GE/Eurodollars is more than a tick!


But every high volume participant would likely end up classified as a market maker.

imo ftt is a non starter for trading in the states (at basically any level). I imagine most exchanges have a plan to take trading offshore. ICE setup the Singapore mini energy contracts in preparation for an EU ftt, i'd imagine every exchange has a similar plan in place. It will definitely be a headache, but not overly concerned with it taking away my livelihood.

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 SMCJB 
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addchild View Post
But every high volume participant would likely end up classified as a market maker.

Agreed so almost everybody they are really targeting would be exempt and it would just become a tax on retail traders. Which in my opinion would completely defeat the point of the tax.

addchild View Post
I imagine most exchanges have a plan to take trading offshore. ICE setup the Singapore mini energy contracts in preparation for an EU ftt, i'd imagine every exchange has a similar plan in place.

Wouldn't ICE (old IPE and LIFFE) be considered UK and not Europe now? Haven't had these conversations recently several years back when I was having this conversation with a senior exchange member, they said that they believed all the exchanges had plans to move trading to Switzerland in the event of a European wide FTT.

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 ReximusMaximus 
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addchild View Post
But every high volume participant would likely end up classified as a market maker.

imo ftt is a non starter for trading in the states (at basically any level). I imagine most exchanges have a plan to take trading offshore. ICE setup the Singapore mini energy contracts in preparation for an EU ftt, i'd imagine every exchange has a similar plan in place. It will definitely be a headache, but not overly concerned with it taking away my livelihood.

While relocating offshore might help the exchanges to avoid FTT, wouldn't domestic US traders still be subject to the taxation as citizens and residents? I'm sure it's impossible to say just yet but I can't imagine Uncle Sam letting that coin go.

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 Mich62 
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I've been watching those political talking heads discuss financial transaction tax in the EU for over 10 years. They need the money to finance their ever growing non productive bureaucratic government. They will take the money from everywhere they can like big companies via taxes and under the name of regulations. They will suck out the last penny of the people via taxes to support their extraneous expense pattern while growing insurmountable debts also to be paid by the plebs. Until revolution sets in like seen in ancient times.

I stopped paying attention to it years ago as it is out of my control (even voting doesn't help). When it comes it comes and I will see what will be the best thing to do at that time. Before that no need to worry or speculate I would say. Ehh, I mean yes speculate, on the markets but not on politics as they are unreliable and even more unpredictable than let's say the ES, GC or CL for that matter

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 addchild 
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ReximusMaximus View Post
While relocating offshore might help the exchanges to avoid FTT, wouldn't domestic US traders still be subject to the taxation as citizens and residents? I'm sure it's impossible to say just yet but I can't imagine Uncle Sam letting that coin go.

Its hard to guess about something that doesn't exist at all right now, but exchanges wouldn't be moving offshore to save themselves a ftt, they would do it to save their customers a ftt, and in turn, their business.

Again its only speculation but I'd imagine traders who are effected would likely end up being the sole US employee of a shell company in whatever tax preferential country the exchanges land in. So the government would get theirs, but it would just be taxes on income.

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 ReximusMaximus 
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addchild View Post
Its hard to guess about something that doesn't exist at all right now, but exchanges wouldn't be moving offshore to save themselves a ftt, they would do it to save their customers a ftt, and in turn, their business.

Again its only speculation but I'd imagine traders who are effected would likely end up being the sole US employee of a shell company in whatever tax preferential country the exchanges land in. So the government would get theirs, but it would just be taxes on income.

Some proposals I've seen have included splitting the FTT between the trader and the exchange. Either way, not much we can do about it aside from hope that if/when it happens it is reasonable.

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