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.

Traders Poll

Are you in favor of a pilot program and examination of the rebate system by the SEC?




Free Site Registration

May 31, 2004

A Tax Cut For Traders

By Gregory Bresiger

The trading industry is now enjoying a big cost reduction.

The Security and Exchange Commission recently reduced the Section 31(a) transaction fee. It was cut from $39 to $23.40 per one million dollars.

"This substantial mid-year rate reduction is due to the increases in dollar volume of securities transactions and the late time of the FY (fiscal year) 2004 appropriations for the SEC." So says David Franasiak, a securities industry lobbyist in Washington for the Securities Traders Association. He informed members of the group in a recent memo. The rate is effective until the fall when the SEC will review it again.

Section 31(a) is designed to pay the costs of the Securities and Exchange Commission. Franasiak said that a continuance of the lower rates is dependent on strong levels of trading. Last year, the securities industry was able to persuade Congress and the president to provide relief.

For several years, the industry had been arguing that the rate was set too high, generating more money than was needed to fund the SEC budget. STA ran a projection on the estimated amount of savings because of the lower Section 31(a) rate. Based on estimated transaction volume in fiscal year 2004 of some $31 trillion, transaction fees - if applied at the new rate for the entire fiscal year - will decline by some $309 million. This assumes that market volume will stay about the same for the entire year.