[flacaltenn]

whell:

Right on.. Didya notice that the main thrust here is NOT how to fix the problem, but how to justify TAXING trades. I figure the problem here is mis-diagnosed and not in proper priority of abuse.

JonL:
I'm back to 'splain why taxing transactions does NOTHING to fix this problem (if you want to insist that's it's a horrible monstrously big problem). Dark pools are unregulated. They exist to match buyers/sellers because there is always a split between the asking price and the bid price. THAT gap alone is more than the transaction latentcy of a few milliseconds. So TAXING all the OPEN market orders would do NOTHING NADA to fix the problem.

Furthermore, if I place a BUY order with my broker, and the market price is going DOWN, I hope he's located on another PLANET so that the transmission latency is MINUTES or HOURS... Besides even as a weenie investor, I can place limits on that trade so that it's got to settle EXACTLY at the price I want to get or better. I'm not harmed and you aren't either. In fact, the $15 transaction fee or better is MY highest concern, not withstanding the irritation I'd face by being subject to a meaningless Fed Tax on that transaction.

The article also confuses what the incomes of these latency traders are with how much of that income was a direct of skimming a a couple of pennies per share. The experiment in that article was also a head-scratcher, because in reality, the investigator placed a dummy bid order to affect the mean bid/ask price on the GENERAL MARKET. But the trade went thru EXACTLY as he ordered in the dark pool. He got EXACTLY what he asked for. And rather than just speculate that his ploy of lowering the bid/ask in the general market enabled the scalpers to scalp him by 0.02, an alternate explanation is that the scalpers ignored the General Market price because the CUSTOMER asked for a transaction in the dark pool..

In other words, go ahead and make it illegal for folks to discuss buy/sell offers outside of the official exchanges (good luck with that). But don't use volume or speed of transactions as an excuse to add a tax that won't affect ANY of the practices described here. After all, in that example, it was NOT VOLUME trading that "could have" skimmed a couple cents -- it was ONE well-timed trade. The same one time trade for which you want to punish me and everyone else for..

And anyway, you gonna tax all the BIDS I place to buy Disney at ridiculously low prices? Or just the one order that actually connects with a seller and results in a sale? Don't tell me it's the former because that would SERIOUSLY handicap the ability to actually connect willing buyers with willing sellers...

I just bought tickets for a Sugarland concert thru an "authorized broker" that the venue linked to. The tickets were marked up 120% over the arena price. Why don't we fix that first? Why is it illegal for some dude to stand outside and ask 50% over, when the venue is directing folks to brokers who mark them for %120? TAX THAT!!!