What A Financial Transaction Tax Would Mean For Traders: PreMarket Prep Recap For Feb. 19, 2020
Michael Bloomberg’s proposed financial regulations sent shockwaves through Wall Street on Tuesday. Among the proposals is a financial transaction tax that would amount to a 0.2% charge on all trades of stocks and derivatives.
On Wednesday’s PreMarket Prep, co-host Dennis Dick outlined what implications this could have. Dick noted that should a financial transaction tax be implemented, one of two things is going to happen: there’s going to be an exemption for market-makers to provide liquidity, or if not, spreads are going to widen significantly. Either situation would be bad for market participants.
What A Financial Transaction Tax Would Mean For Traders
“At any given time during the day, Bank of America has a nice little $0.01 spread,” he said. “If you propose a 0.1% (fee) in on your buy and a 0.1% out on your sell, that’s 0.2%. So there’s no market maker that’s going to make a $0.01 market on Bank of America when they’re going to pay $0.06 on the transaction. All of a sudden your nice $0.01 market is at minimum $0.06 wide, that’s the break-even. But they need to make some money, so now it’s $0.10 wide.
“That assumes no market maker exemption. I don’t think they would let that happen, so I believe there would be a market maker exemption and then you’re not punishing Wall Street at all. Because the only people who would be paying the bill is the retail traders and your institutions who are moving money in and out. So in both scenarios, if they don’t get exemptions they’ll widen the spreads, and if they do get exemptions the spreads stay the same but they don’t pay any of the bill anyway. This is not going to punish Wall Street, this is going to punish Main Street.”
Co-host Joel Elconin noted that the timing is interesting. Should a transaction tax be implemented, it would come after years of fee compression finally resulted in most of the major brokerages going to $0 commissions on their stock, options, and ETF trades.
For the full discussion on the implications of a financial transaction tax click here.
Other Stocks Discussed On The Show
Some of the stocks also discussed include, with technical levels provided by Joel:
- Tesla Motors(NASDAQ:TSLA) (click here)
- Virgin Galactic Holdings Inc(NYSE:SPCE) (click here)
- Apple Inc(NASDAQ:AAPL) (click here)
- SunPower Corporation(NASDAQ:SPWR) (click here)
- Enphase Energy Inc(NASDAQ:ENPH) (click here)
- Beyond Meat Inc(NASDAQ:BYND)(click here)
- Rite Aid Corporation(NYSE:RAD) (click here)
- Roku Inc(NASDAQ:ROKU) (click here)
- Garmin Ltd(NASDAQ:GRMN) (click here)
Corey Hoffstein, Chief Investment Officer of Newfound Research
Newfound Research LLC is an investment firm dedicated to helping investors pro-actively navigate the risks of investing through thought leadership and investment acumen. We specialize in the construction of high conviction, tactical portfolios. Our strategies provide access to the systematic application of major quantitative investment styles such as value, momentum, carry, defensive, and trend. Newfound Research was founded in August 2008.
Corey’s full interview can be viewed at 16:09 in the video below or by clicking here.
Kim Rivers, CEO, Trulieve
Kim Rivers currently serves as chief executive officer of Trulieve Cannabis Corp., a vertically-integrated "seed-to-sale" operation based in Florida. Rivers joined Trulieve at its inception and has been the key driver for the Company’s customer-centric vision, strong growth, strategic expansion, and industry-leading profitability. Ms. Rivers oversees every activity involved with the cannabis process from seed to sale to ensure quality, operational integrity and financial success. Prior to Trulieve, Ms. Rivers spent several years in private practice as a lawyer where she specialized in mergers, acquisitions, and securities for multi-million dollar companies and has run a number of successful businesses from real estate to finance. Her experience has been instrumental in building Trulieve’s market leading position in its home state of Florida and provides the solid foundation on which to execute on growth and expansion initiatives as a multi-state operator.
Kim is set to speak at next week’s Benzinga Cannabis Capital Conference in Miami. For more information about what will be discussed and who will be at the conference, click here.
Kim’s full interview can be viewed at 1:00:18 in the video below or by clicking here.
Watch the full show or listen to the podcast below.
PreMarket Prep is a daily trading show hosted by prop trader Dennis Dick and former floor trader Joel Elconin. You can watch PreMarket Prep live every day from 8-9 a.m. ET here. The replay can be found on Benzinga's YouTube channel, and the podcast is on iTunes, Google Play, Soundcloud, Stitcher and Tunein.
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