1/20/2024 0 Comments Hillary financial transaction taxMoreover, it is trading that happens so quickly that it is imperceptible by shareholding investors and management. In addition, the HFT tactic addressed by the cancellation tax, while important, is just one element of excessive trading activity. The order cancelation tax would not raise any where close to the same level of revenue since it would effectively stop the practice of tactical mass order cancelation. The FTT would slow down transactions and curb excessive market churning by speculators, while also raising substantial revenues. Quarterly capitalism is caused by short-termism of corporate management and shareholders driven by the dominance of the trading culture that fetishizes short swing share price changes. The FTT (together with other market reforms) would be an important curb on the “quarterly capitalism” that Secretary Clinton has properly cited as a drag on economic growth and contributor to income and wealth inequality. It would impose a small tax on all transactions, not orders that never become transactions. This should not be confused with a true financial transaction tax (FTT), a measure proposed by presidential rival Bernie Sanders and many strong advocates of Wall Street reform. Her tax proposal is mostly about penalizing an unfair practice. It does so on the margin, but the instability primarily affects short term volatility. Secretary Clinton suggests that this makes markets less stable. The HFT traders then cancel the orders and take advantage of the herd activity that they have incited, in essence making the herd back track through them. The other market participants react like a herd to position themselves for the anticipated market move. It targets tactics where HFT traders place large numbers of orders to buy or sell, leaving the impression among others in the market that prices are going to move up or down imminently. The High Frequency Trading (HFT) provision would put a cap on market order cancellations, a practice often used by traders who employ super computers and sophisticated software to trade at speeds that are unimaginably small. They are designed to curb trickery and sharp dealing and they increase the likelihood that financiers who are wrongdoers or condone wrongdoing will be penalized, though the practical utility depends on details that are not yet available. On substantive issues, her proposals go after bad behavior that make markets unfair and allow banks and others to cheat. The greater protection of this dis-incentive is commendable. This is best thought of as a supplement to capital rules, also based on risk. We do not know what level Clinton envisions, but have our fingers crossed that super-regulator Gary Gensler, her campaign's chief financial officer and a key adviser on Wall Street issues, has made sure she knows what is required.Īdditionally, Secretary Clinton advocates a fee on big banks measured by risk. In Dodd-Frank, the CFTC was tasked with regulating the devilishly complex and risky $60 trillion per year swaps markets, and was never given anywhere close to the funding needed to carry out this task. The proposals stop short of measures that would change the system and alter the trajectory of capital and investment for the benefit of the average household.Īt the outset, we must praise Secretary Clinton for proposing an increase to the funding of the Securities and Exchange Commission and, particularly, the Commodity Futures Trading Commission. While Clinton's proposals mark an improvement over the current system, however, we are left to ponder what might have been. These proposals have been carefully crafted to outlaw and punish bad behavior, correct some flaws in the 2010 Dodd-Frank law and repair damage done by reform opponents. Hillary Clinton’s Wall Street policy proposals are all good, solid reforms and will improve the performance of the financial sector.
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