macrocephalopod on Twitter: "It incentivises MMs to warehouse risk instead of flipping it and incentives orders to build up near the best bid/offer (instead of tiny size at the NBBO with all real size further back which is what you see in the US)… https://t.co/ecF00CleVf"

@macrocephalopod

Paul Allen, Vice President M&A, Pierce & Pierce (Sie/Hir) | Vegan | Silence is Violence | Women’s Rights Are Human Rights | ACAB (Assigned Cephalopod At Birth)

Joined December 2020

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Lily.wav‏ @nope_its_lily 16 Feb 2021

Lily.wav Retweeted Buy Wall

If this passes market go bye byehttps://twitter.com/talesmelodicpts/status/1361806203647520769 …

Lily.wav added,

Buy Wall @talesmelodicpts

@nope_its_lily Do you know anyone who can parse the trading tax proposal and let us know if options would be taxed based on the premium or the notional value? e.g. $0.39 OTM PYPL contract taxed on $39 or $30,479 (100 shares x $304.79): https://www.congress.gov/bill/117th-congress/house-bill/328/text?q=%7B%22search%22%3A%5B%22Wall+Street+tax+act%22%5D%7D&r=1&s=1 …

7 replies 2 retweets 55 likes

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Lily.wav‏ @nope_its_lily 16 Feb 2021

Liquidity becomes lolquidity

3 replies 2 retweets 58 likes

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macrocephalopod‏ @macrocephalopod 16 Feb 2021

Replying to @nope_its_lily

South Korea has a 10bp transaction tax and no obvious liquidity problems.

3 replies 0 retweets 2 likes

Lily.wav‏ @nope_its_lily 16 Feb 2021

Replying to @macrocephalopod

I guess it really matters what the profit margins of HFT options MMs here are. I don't think in a lot of cases they can absorb 10bp.

1 reply 0 retweets 1 like

macrocephalopod‏ @macrocephalopod 16 Feb 2021

Replying to @nope_its_lily

They wouldn’t continue quoting the same spreads if there was a transaction tax! Spreads would widen but more volume would be transacted near the NBBO because there is more profit margin built in for market makers. Not obvious that it’s worse for liquidity.

3 replies 0 retweets 2 likes

Lily.wav‏ @nope_its_lily 16 Feb 2021

Replying to @macrocephalopod

I mean. I suppose but at the end of the day liquidity in the standard sense of measurement (width of bid-ask) would likely decrease substantially, especially on fairly liquid tickers, no?

1 reply 0 retweets 0 likes

macrocephalopod‏ @macrocephalopod 16 Feb 2021

Replying to @nope_its_lily

Yes but the quoted bid-ask is not the main cost you pay when executing an order — the price slippage is. Saw an article earlier today which said you can frequently trade 1% of ADV in SK at the top of book price — that never happens in US.

1 reply 0 retweets 1 like

macrocephalopod‏ @macrocephalopod 16 Feb 2021

Replying to @macrocephalopod @nope_its_lily

I thought your whole thing re: liquidity was that trading moves the price more than it used to (eg thinner books, orders being pulled when the price moves toward them etc). A transaction tax fixes some of that (with other costs of course).

1 reply 0 retweets 2 likes

Lily.wav‏ @nope_its_lily 16 Feb 2021

Replying to @macrocephalopod

I'm not tracking why a transaction tax fixes that.

1 reply 0 retweets 1 like

macrocephalopod‏ @macrocephalopod 16 Feb 2021

Replying to @nope_its_lily

It incentivises MMs to warehouse risk instead of flipping it and incentives orders to build up near the best bid/offer (instead of tiny size at the NBBO with all real size further back which is what you see in the US)

3:38 PM - 16 Feb 2021

4 Likes

2 replies 0 retweets 4 likes

1. Lily.wav‏ @nope_its_lily 16 Feb 2021
  Replying to @macrocephalopod
  
  Ah gotcha. Interesting perspective, and I could see that. Thanks for the insightful answer.
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