The Role of Stock Market Speculation: DEVELOPMENT -part 7-
The Tobin Tax is a tax that is intended to discourage financial capital to participate in speculative trading. This is to charge a small fee for each transaction of purchase and sale of shares held and the currency exchange operations.
Due to the astronomical sums that are exchanged in these markets, the volume of taxes collected at the country level would solve the most urgent challenges of poverty in each of them.
The Tobin Tax is a matter of universal importance, is currently under debate in the parliaments of various European countries among which one can cite Finland, France, Germany, Switzerland, Britain, Belgium, Ireland, Spain and the European Parliament, plus Australia, Canada, United States, Brazil, Argentina and Chile.
Both arbitration and speculation are transactions of purchase/sale that was made in order to obtain a short-term capital gain, regardless of the company you are investing. Therefore, arbitrageurs and speculators are not very well regarded by most investors, while the latter would be willing to practice if they had the necessary information.
Arbitrage occurs when a value is traded on several markets and local circumstances, there is a price difference. The arbitrageur buys time where it’s cheap and sell when the price is more expensive, thereby gaining a profit. Although at first sight you only see the profits of the arbitrageur, and hence its “bad reputation”, the truth is that the market is useful because it helps to offset prices: If you find cheaper where most orders come The price will rise. And, where is more expensive, more shares are sold, the price will fall.
Speculators are also “opportunistic” because they bought with the idea of selling the very short term and obtain a profit. The adjustment, in this case occurs at the time. Speculators enter and exit the market, taking advantage of price declines and selling when prices rise. As in the case of arbitration, are also useful because they make the market more quickly recover their balance. In any case, one thing is to take advantage of the situation known to all, and another is to use inside information. In this case, it is a crime and we must denounce.
Arbitrageurs and speculators are also investors, although its operations of purchase / sale is made in the very short term and, as we have seen, play an important role in markets. To perform these operations need to be well informed and yet the markets, why, in general, most small investors, who spend part of their savings to the stock market, long-term investing and not often act as arbitrageurs and speculators.
In any case, it is well to remember that investing in stock market profits reported to shareholders through three channels: dividends, right of first refusal in capital increases and capital gains. The bondholders, in turn, besides being able to obtain returns through interest, can earn money by liquidating their values and providing added value.
credit to: Lic. Eyelin Bello Caballero, MSc. Yaicel Rangel Díaz and MSc.Eimyn Rizo Lorenzo
Source: www.gestiopolis.com/finanzas-contaduria/especulaciones-en-los-mercados-financieros.htm
image source: www.omm.com/files/FirmService/e9fc8f64-b604-4159-b314-14dc2c8430d5/Presentation/ceServiceImage/Capital_Markets.jpg