Stock trades and realized gains/losses

Hugh A.J. Kennedy hajk@oakweald.de
Fri, 10 Jan 2003 14:38:46 +0100


Ok, I have worked on three stock exchanges, a national depository and for
numerous exchange members so I have another viewpoint (which may be
inappropriate for the private trader or even plain wrong).

I prefer accounting for shares in lots because many countries implement
'speculation taxes' that tax capital gains differently for short-term than
long term holdings. It therefore becomes extremely useful to keep track of
share packets depending upon when they were bought and their initial
purchase price.

Valuing a share on a minute by minute basis isn't so interesting unless we
want to address the day-trader. For valuation purposes a once-per-day at
closing or on-request (and wait) is fine.

The last point is for international processing, a share in Frankfurt is not
the same as the same share in New York. The actual share is sitting in a
registry at a central depository, either DTC in the case of the NYSE or
Deutsche Boerse Clearing in the case of Frankfurt. What this means is that
there may be additional costs if you wish to sell your Frankfurt share in
New York or vice versa. It is therefore important to be able to keep the
shares separate.



Hugh Kennedy