This approach allows slight, transient differentials to be exploited for profit. It can also lead to unexplainable market volatility like the so-called "flash crash of 2010".
To discourage such wild speculation while at the same time raising money for deficit reduction, Senator Harkin of Iowa has introduced legislation to place a tax on trading activity of banks and financial firms. It would mean that financial market traders would pay a small fee to the government every time they purchased any financial market instrument. It would include all stock, bond, options, futures, and swap trades.
The measure does no harm to long-term investing, but instead targets financial trading and complex transactions undertaken by financial and investment firms. In it's present form, it is estimated to raise $350 billion over a decade, while if it was raised to a level comparable to the U.K. at .5%, it might raise over a trillion dollars in the same period.
