European Tax on Financial Transactions...

[Chippy Minton]

Looks like France is actually going to do this http://www.bbc.co.uk/news/world-europe-16783520

Sarkozy must be worried about the polls showing the socialists are going to get back in!

[Huguenot]

It's a bit like Cameron slamming down his hand and announcing a tax on the UK production of Camembert and Bordeaux.

[Loz]

Nice bit of micro-testing if he manages to implement it (and that's a big if). It will be interesting to see its effect. Any significant movement offshore of financial transactions should see the Robin Hood tax shoved aside by the rest.

[BrandNewGuy]

Huguenot Wrote:

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> It's a bit like Cameron slamming down his hand and

> announcing a tax on the UK production of Camembert

> and Bordeaux.

:))

[El Pibe]

Red Ken makes a point that accords with what I'vbe long suspected, the relocation thing is an empty threat to manipulate cowardly, self-serving politicians.

because I have been around for a long time, I've also learned how much of what you are told is bulllshit. And when I hear so many people in the City say they're all going to go [because of higher taxes], the simple fact is we really only have one rival, and that is New York. You are not going to have major banks in the City relocate to Shanghai because there's a degree of political uncertainty, perhaps decades ahead. They are not going to Frankfurt because young men want to go out on the pull and do a load of cocaine and they can't really do that easily in Frankfurt.

I also suspect the corollary to the threat is that the desired behaviour will result in a nice directorship when you're done with all this tedious public service nonsense.

[maxxi]

El Pibe Wrote:

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> Red Ken makes a point that accords with what I'vbe

> long suspected, the relocation thing is an empty

> threat to manipulate cowardly, self-serving

> politicians.

>

> They are not going to Frankfurt because young men

> want to go out on the pull and do a load of

> cocaine and they can't really do that easily in

> Frankfurt.

>

As out of touch as ever our Ken:-

Frankfurt has designated the area around the Hauptbahnhof for the sex trade and illegal drugs. Junkies can take, but not sell, drugs, and clean needles are distributed. In all likelihood you will see drug use during your visit, but the police and private security patrols help to keep things under control. The crime rate in these areas is low as it is in the rest of the city.

Red Light Frankfurt

...and London's red light district and drug zones are located...?

[El Pibe]

Mostly in the square mile ;)

[Jeremy]

maxxi - Ken's talking about pulling Essex girls and snorting coke, not shooting up with Bosnian prostitues.

[BrandNewGuy]

Great! When do we start...?

[Burbage]

Mick Mac Wrote:

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> This is a case of investors will abandon us rather

> than bankers moving offshore. Its the investments

> that suffer the tax and these will go elsewhere,

> leaving us with too many bankers.

>

Not necessarily. One of the things a transaction tax might curb is high-frequency trading. That's currently one of our exchange's selling points, and it allows institutions to build very quick computers to arbitrage tiny price differences in nanoseconds. This comes in for some criticism as it substantially distorts trading volumes and effectively skims the potential gains of 'real' investors, by buying and selling immediately before they buy (thus 'normalizing' the price upwards) or vice versa before the sell.

The argument for it is that it 'curbs volatility', thus protecting investors from uncertainty and distorion. The argument against it is that it's a risk-free way of gaming the market without any intention to invest in anything for longer than milliseconds, and amounts to nothing more than a bank-imposed transaction tax on everyone else.

To my mind, if investors were going to be put off investing by the a tiny tax, they'd have gone already, assuming they knew how it works. If a new transaction tax is set at the right level, and makes the high-frequency scams unviable, then proper investors shouldn't notice any difference.

[Loz]

It might, Burbage. The problem is, I don't believe the rates being touted have been set with that in mind - they have been set to achieve a (rather mythical) magic number, generally in the tens to hundreds of billions, that somehow manages to solve any and all problems you can think of - generally all at once. The original website for the Robin Hood tax campaign laughingly said the proceeds of the tax would go to 'good causes', thus making everyone believe their pet issue would suddenly have a limitless amount of money to throw at. The deficit, the NHS, poverty, climate change, overseas aid, world peace - there seems nothing this wondrous tax won't solve.

But, as been said before, the biggest problem with it is that, unless it is set globally, it just won't work. If they go ahead, France will make for a very interesting test case.

[HAL9000]

Burbage Wrote:

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> high-frequency trading. ... effectively skims the

> potential gains of 'real' investors, by buying and

> selling immediately before they buy (thus 'normalizing'

> the price upwards) or vice versa before the sell.

What you describe sounds like a type of fraud called 'front running' that is occasionally committed by market makers and prime brokers.

A properly constructed HFT algorithm does not engage in any illegal activity.

> The argument against it is that it's a

> risk-free way of gaming the market without any

> intention to invest in anything for longer than

> milliseconds ...

The majority of HFT positions are indistinguishable from those of a typical day trader - very, very few are held for ?milliseconds?. In order for an HFT position to be profitable, the difference between the opening and closing prices must exceed the bid?offer spread twice and the day-trade commission (if applicable) and the exchange fees AND realise a positive profit margin. They are also subject to any applicable uptick rules.

The same consideration applies to an arbitrage-seeking intra-market HFT system with the additional burden of having to pay two sets of commissions and exchange fees and to compensate for currency exchange rate movements.

High frequency trading is not risk-free; it is a high risk strategy. There is no free lunch!

[Chippy Minton]

There's a new report published today that claims a European-wide tax would boost growth in Europe by at least 0.25%

[Huguenot]

And shrink the UK economy by 5%, but that isn't mentioned... ;-)