Let me try this example instead. What is easier to buy and sell, a stock or a house? A stock and the reason being because there are many more participants than when trying to buy/sell a house. This tax will eliminate countless participants and by default you will have a much more illiquid market.
Unless you have market participants, it doesn't matter how advanced your computers are. Heck, even today there are stocks on the Nasdaq that have spreads that are wider than 1/4. Why? Because these are small, illiquid stocks with very few market participants. This tax would copy that environment to most major stocks and have wider spreads as well.
I don't think that's correct. As far as I know, the only thing that would be exempt are retirement accounts. But it begs the question, doesn't it, if this tax is so tiny and have no effect on anybody, then why the need to exempt retirement accounts? After all, we are told it is such a tiny tax.
At any rate, in reality nobody will be exempt. As samclem mentioned in his post above, research has shown that spreads will increase when this type of tax is introduced. And once they increase everybody will pay, irregardless of whether they are exempt or not.
Exactly. The short term traders provide the volume. Once you kick them out of the market, long term investors will get worse pricing via widen spreads. Sure, if you are holding ABC company for 6 years you won't see a charge until you sell the stock when you pay the tax/wider spreads. But if you are mutual fund holder, you will pay this tax as an increased fee on a regular basis.
What I meant was that we have the most stocks in our markets in the world. They are the most liquid. There is no other country where corporations can raise capital in such an easy way as here in the US. Part of the reason is the liquidity in our stock market. Once you deny traders this liquidity, you are bound to make it harder for corporations to raise capital down the road. If they can't raise capital, then they can't buy equipment, hire people etc. Why would we want to go down this road where we are pushing investors/traders to foreign countries?
Finally, what most likely will end up happening is that companies such as Goldman Sachs, Morgan Stanley will be exempt from this tax as they are market makers and instead everybody else will pay. They have the lobbyists and can fight it, and I believe this is what was in the UK. How is that possibly fair?