I must be missing something. Doesn’t the cash end up in the seller’s checking account?
BTW, stock exchanges do not provide any way to trade one stock directly for another. That would be incredibly complicated…
Back to the interesting stuff:
By “pt” do you mean basis points (1/100 of a percent)? Imposing a 25 cent transaction fee on a $10K trade would definitely change the behavior of high frequency trading systems (this is not necessarily a bad thing.)
I’m not arguing against such a fee, I’m just making the point that liquidity is a good thing in markets. It benefits *all* participants, from the high-volume trader to the individual investor. Taxes on transactions will take some of this benefit away. But it may be a good tradeoff with the right parameters.[/quote]
You have a good point there. I didn’t really write what I was thinking. If an investor moves money from a bank account into the market by buying stock and the seller of that stock then acquired a different stock, the money supply has gone down. If the seller stays in cash, you are correct, no change to the money supply. And by trading, I meant sell Ford, buy Alcoa.
1/4 pt is .25%. $2.50 on a $1,000 trade. Serious investors will bitch, but not flinch. Specially if it’s only one side of the trade. Many day traders will flinch. But it would be like the casinos on some cruise ships, where the blackjack dealer stays on a soft 17. Some gamblers will still sit down at the table, despite the reduced odds.
