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Ban OTC? How are you going to do that?

Simple. You cannot legally change ownership of anything that is traded on an exchange without notifying the exchange and paying the Tobin Tax.

The same way that you cannot legally change ownership of a house without notifying the local zoning authority and paying stamp duty.

Private agreements that, at some future point in time, securities that are traded on exchange will change hands should be similarly unenforceable, unless they are registered with the exchange. Precisely the same way that I cannot hold you to a promise you make to sell me your house at some agreed-upon time at some agreed-upon price, unless the contract has been signed and notarised.

Contracts between private third parties require the government to enforce them. So if the government ceases to enforce certain kinds of contracts, they cease to have meaning as contracts and become much vaguer kinds of promises. Private enforcement of such promises is what's known as "blackmail" and it is usually frowned upon in polite society.

Why? A replication strategy is only a sequence of trades, such as any person might do. The difference is in the player's mind. Whereas a casual investor has no idea what the end result of his investment strategy will be, beyond a nebulous hope of increasing his wealth, the replication strategy is designed to create a specified function of the underlying stock.

Yes, and that's the problem. It works on the stock price to generate revenue, rather than the underlying cash flow.

Which is a bug, not a feature.

And Tobin concerns exchange trades only, right? What private companies agree between each other about what they will or will not do on the exchange is not covered, right?

Correct. But if such agreements are not enforced by the state, the first time any party finds itself in a losing bet he can simply walk out without further discussion.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri Jul 31st, 2009 at 05:27:28 AM EST
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Simple. You cannot legally change ownership of anything that is traded on an exchange without notifying the exchange and paying the Tobin Tax.

Exchanges? Who needs exchanges?

Where's the exchange in the world of FX?

Exchange trading would disappear into "dark pools" of liquidity in five minutes. A lot already has.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Fri Jul 31st, 2009 at 07:10:20 AM EST
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Where's the exchange in the world of FX?

Basel.

It's not a very effective exchange, as a number of SE Asian countries will attest, but it's there.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri Jul 31st, 2009 at 07:24:55 AM EST
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Basel??

CLS Bank is the closest thing there is and it's not even remotely possible to operate at the requisite level of granularity.

There is not a cat in hell's chance of a Tobin Tax without a new clearing network created - or evolving - from the ground up.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Fri Jul 31st, 2009 at 07:40:14 AM EST
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Because existing exchanges would resist?  Because capital would flee to "dark pools" and engage in legally unenforceable transactions?  Well, various mafia's do seem to be able to do business, but...

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Fri Jul 31st, 2009 at 01:49:07 PM EST
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