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Comment by nandemo | Hacker News Reader

A 1% tax would still be huge. Traders measure trading cost in basis points (100ths of 1%). Such a tax would affect not only high-frequency traders, but also all market makers and even long-term investors like pension funds and mutual funds.

To operate an index fund, for instance, you have to buy and sell millions of shares everyday. A 1% tax would make impossible to operate an index fund cheaply.

Cuban's proposal is not serious. Yeah, I know he's rich and all, but he doesn't understand how the stock market works.

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I think he understands it just fine. Implement a tax that requires people to actually buy stock for reasons other than its price. Make it too expensive to trade millions of shares every second to make small fractions of a return. Make people buy shares because they want to see the company succeed, not to make a quick buck.

Back to basics. I kind of like the idea.

More like back to the stone age. Look at the Indian stock market: they have transaction taxes on the order of .01-0.1% and the bid-ask spreads are huge. A tax like this would make it even more difficult for average people to get a fair price.

> Implement a tax that requires people to actually buy stock for reasons other than its price.

Huh?

I buy stock to make money. I make money when I buy at a lower price than I sell said stock. Note that price plays a role in both transactions.

Serious question - who buys stock for reasons other than price expectations?

Some people buy (a small number of) stocks for dividends. But that's very rare, since dividends are taxed twice while capital gains are taxed only once.

I don't think you understand that people who make markets (add liquidity) decrease YOUR investment costs. These market makers can only trade millions of shares per second (a vast overstatement) IF there is actual demand for that. Suppose there is such demand. Then, the market makers are providing a valuable service by supplying liquidity for people who want to buy or sell.

A sales tax would vastly increase costs for everyone involved. Your parents pension fund would generate lesser returns because it costs them more to enter and exit positions. Your "back to basics" quip is bullshit. What does "going back to basics" even mean? People trade because they think they can make a profit or hedge their risk. That's all there is to it, nothing "more basic".

yep, 1% would be insane, I started trading actively for the first time on friday & I would certainly not be in the game with my money with a 1% trade punishment

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