Over the last five years, the trading community has seen their numbers drastically shrink. Rising infrastructure costs, political vilification of the trading community, and a hostile regulatory environment have all taken their toll. But since the election of Donald Trump as President, there has been a large uptick in traders returning to the industry as well as newbies put their hats into the ring of professional trading.
It’s game on. But for how long? The consensus on the street is for at least another four years. They sense opportunity again. Floor traders are returning to set up their own shops. College kids with degrees in quantitative analysis and machine learning are seeking jobs with larger funds. Once again, trading is considered a potential career young grads. It seems that the trading community as a whole has dodged a real bullet. For his entire term in office, President Barack Obama has resisted both national and international pressure for a financial transaction tax. What is a financial transaction tax, or FTT? I’m glad you asked. It is the silver bullet that would finally do away with what the general public now considers a nemesis and vampire – traders in the financial markets.
The FTT bill is still in Congress and has been for a while. Sparing you all the details, let’s say you bought 1000 shares of Conoco Phillips stock. Even on margin, you would pay tax on the aggregate purchase and value of the entire 1000 shares of the stock. So, about $900 on the way in, and $900 on the way out. The desired taxes on futures and options are still unsettled, but probably equally as obtuse.
So the political movement behind this tax claims that, based on current transaction volume, these gigantic taxes would pay for young peoples’ college, healthcare, and just about every other evil in America. What they don’t understand is that, when big money and market makers see their $900 coming and going with each of these small transactions, the volume on a large stock isn’t going to be upwards of 10 million shares a day. It’s going to go down to several thousand shares a day and big money is going to leave and invest in real estate in Australia or New Zealand, instead of paying for the college educations of people they don’t know.
It makes you wonder whether or not the idea for this tax isn’t part of a larger agenda by those that fund politicians. Because in the end, the net effect isn’t going to be that anyone’s college gets paid for. The results simply will be the no one will be able to profit by trading the financial markets. And, when you remove that much liquidity, there is a potential for the market to sink just as if you remove the “liquid” under a boat. Seems a bit strange that they can’t figure this one out.
The angst against traders, based on the misnomers that all of them are stealing everyone’s money, hasn’t disappeared. In fact, it may have gotten worse with the political and social unrest surrounding the last election. Right now it can’t get translated into law or enforced. But with this level of division in America anything can happen next election.
So, if you believe there is opportunity trading the financial markets, now is the time! As we explained in our article “props & quants,” big banks, financial institutions, hedge funds, and prop firms are all lunging back into trading. They are all reassuring the public that, no matter what Donald Trump does with Dodd-Frank and the Volcker Rule, they will not return to risky proprietary trading. Hey, but who the hell said anything about quant trading or algorithmic trading?
That’s right, they have learned the semantics game. Just take a look at the boom in job postings for many of these big banks and financial institutions for traders. That’s right, it’s game on. If you are going to do this, now is the time.