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Technology Stocks : Qualcomm Incorporated (QCOM)
QCOM 76.00+1.1%Oct 24 8:10 PM EDTNews

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To: quartersawyer who wrote (152300)5/11/2011 1:32:12 PM
From: Art Bechhoefer1 Recommendation  Read Replies (2) of 152359
 
Your idea about "trading a small percentage of the shares" to determine valuation of all shares is not precise enough.

What really matters is not the total number of shares traded but the kinds of trades and their influence on price. a perfect market system requires large numbers of relatively small size trades such that no single trade can by itself cause the price to change.

An example: If the average daily trading volume for QCOM is about 16 million shares, and if a single entity (e.g., hedge fund, trading firm, etc.) trades, say, 2 million of those average 16 million shares for the day, you can take it for granted that the actions of the trading entity did have a significant impact on the price of the shares. Even if individual trades are only 1000 or so shares, if those trades are initiated by a trading program set to buy or sell 1000 individual trades in a matter of seconds, there will be an impact on share price. That is an abuse of the market system.

Which is why we need a disincentive to make these quick trades that make it impossible for all those in the market for a given stock to be on a level playing field. There is no better equalizer than a service charge that penalizes quick trades, while at the same time offering an incentive to lower taxes on long term trades.

Art
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