Commentary

Tim Quast
Traders Magazine Online News

We're All HFTs Now

In this guest commentary, author Tim Quast looks back at the history of HFT and how the market has evolved to where many firms now fit the definition of high-frequency trader.

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May 31, 2003

Forced to Eat a Rancid Apple?

By Staff Reports

Hard-pressed state lawmakers have come up with another taxing trading idea.

But the so-called transfer tax on stock sales in New York State, many hope, will never become a reality. That's unlike Section 31(a) fees and brutal trading taxes which are imposed by federal lawmakers.

A transfer tax was one of the measures proposed recently by some New York State lawmakers who are seeking to close a $12 billion deficit.

The measure is opposed by New York City Mayor Michael Bloomberg. The Securities Industry Association is also opposed. The SIA, reflecting concerns raised by New York trading houses and exchanges, notes that investors would likely shift trades to market centers outside New York State to avoid the tax.

The introduction of a transfer tax still remains a possibility for New York, especially if the deficit problem worsens. If the tax became law, it could encourage investors to use ECNs and regional exchanges, the SIA argues. That could hurt trading jobs in New York.

Still, there is support for the tax from the New York-based Fiscal Policy Institute. This group has demanded a $0.05 tax on each share traded with a cap of $35 per trade. The Fiscal Policy Institute believes investors would not defect in large numbers to regionals and ECNs.

Wall Street opponents are obviously aware that, if the tax is enacted, it could take a long time to repeal. Despite some relief measures, Section 31(a) fees, paid by Nasdaq dealers and NYSE trading firms, still generate huge sums from stock transactions.