Presidential candidate Andrew Yang has published the following policy proposals on his website:
FINANCIAL TRANSACTION TAX
Financial markets have grown dramatically over the past decades. Speculation in them has also led to bubbles that, when popped, caused untold damage to the world’s economy. In order to raise revenue while also stymying some of the rampant speculation that can lead to financial collapse, a financial transaction tax should be levied on financial trades. This has been adopted by other countries quite successfully.
Investing has been transformed into speculation by computer-generated algorithms and trading platforms. The average holding time of a stock is now only 4 months. There is no real value being generated, just individual firms trying to squeeze value out of the system, often at the expense of the public.
PROBLEMS TO BE SOLVED: Financial transactions and speculation cause risk to the economy, and that risk isn’t covered by those who cause it.
GUIDING PRINCIPLES: Equity Efficiency
GOALS: Raise revenue Limit speculation that has no real economic purpose
As President, I will… Propose a 0.1% financial transaction tax that would raise as much as $50 billion per year that will be used to help fund Universal Basic Income.
The way that trading algorithms currently operate makes it exceptionally difficult to find instances of impropriety. To combat this and make sure that everyone is operating cleanly, we must empower the Commodity Futures Trading Commission (CFTC) to investigate any trades that consistently make money regardless of market movements. We must also enlist a network of veteran traders to police the market, offering them “bounties” on finding illegal activity.
Investing in the market with computer-generated algorithms has become a game of identifying tiny market inefficiencies and wringing them of value at the expense of other investors and the public. There is no real value being generated and it increases the costs for retirees, pension funds and businesses trying to manage their risks. We need to start enforcing trading rules in a technologically sophisticated way.
PROBLEMS TO BE SOLVED: Algorithmic trading is allowing financial crime at an unprecedented and technologically-advanced level.
GUIDING PRINCIPLES: Equity Accountability
GOALS: Clean up the trading markets from improper algorithms
As President, I will… Provide the CFTC with enough funding to properly investigate any suspicious trades/algorithms. Create a new team to find financial crime and bring the perpetrators to justice.
As someone who both aspires to be an independent algorithmic trader (with a preference for short timeframes), and has enthusiastically supported Andrew's campaign, discovering these policy proposals has been somewhat alarming. The intent of this question is to understand the range and extent of detrimental outcomes a Yang presidency may plausibly carry, with respect to my algorithmic trading goals.
The best case scenario is that Andrew further progresses his understanding of this domain before implementing such policies, and updates them to be more charitable and nuanced. For example, he observes that speculation has contributed to bubbles, but not that it ordinarily reduces volatility, while increasing liquidity. He asserts that algorithmic trading enables financial crime, but in my understanding, it actually shrinks the practical feasibility of most types of market manipulation. He seems to oscillate between identifying the core problem to be the crime algorithmic trading purportedly enables, and algorithmic trading itself. Out of character for Andrew, he makes no distinction between the large, professional trading firms profiting nine digits per annum, and the amateur coder striving, in a spirit similar to the hobbyist Bitcoin mining rig assembler, to build his or her own five, maybe-someday-six, digit stream of self-sustaining income.
My question is, if Yang succeeds, what is the worst plausible case scenario, and what are the most likely scenario(s), from the perspective of an independent algorithmic trader? The best answers should include an explication of financial transaction tax, examples of what tangible changes the second policy proposal might entail, and an analysis of how impactful all of this could and is likely to be for algorithmic intraday trading. In terms of the worst case analysis, is it conceivable for a country to make algorithmic intraday trading altogether illegal or unprofitable? Would this aim even align with the CFTC’s interests? The best answers may also raise relevant considerations missing from these suggestions.