October 27, 2009
As for flash orders, and speculation in general, I think that the mechanism to curb it ought to be in the form of capital gains speculation taxes.
the rates would follow a relatively simple time based formula:
any profits made on transactions that take 24 hours or less to complete should be taxed at nearly 100%. under 1 hour would be taxed at a maximum rate of 100%.
then the rate would go down exponentially (something like ((1/t)+r) where t is time from transaction and r is the income tax rate over time until it reached the income tax level of the trader, in about 10 years. a 1 year transaction might have a speculation tax that is 20-30% higher than the income tax level of the trader, to give an idea how the curve would look.
This tax would be deducted immediately upon profit taking at the conclusion of the transaction.
The tax would be paid even if there are overall losses over a long run.
I feel the end result would be far more long term investment, and far less harmful speculation in the market.
I am defining a completed transaction as the purchase, and then sale for profit of any type of financial instrument, commodity, stock, etc. This would include daisy chain type transactions, as well.