Tobin, or not Tobin – that is the question
First Published Wednesday, 1st February 2012 02:30 pm from Fidessa : Steve Grob
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Well at least it is in France, as
href="http://www.guardian.co.uk/business/2012/jan/30/france-tobin-tax-nicolas-sarkozy?newsfeed=true"
target="_blank">reports seem to confirm that its
finance minister is enthusiastically pushing ahead with a
unilateral Tobin-style tax on equities, bonds and derivatives
trading. It's a shame that the proponents of such a tax don't
seem to have done even a basic amount of homework. The original
idea introduced by Nobel Laureate economist James Tobin was
conceived as a tax on all spot conversions of one currency into
another. The idea was to discourage speculators by making it less
efficient to trade one currency against another. This was a
sensible and considered reaction to a problem caused by the
abandonment of fixed exchange rates a year earlier, but it was
never intended to be a retroactive punishment on one sector of
the global economy. The notion that the world's problems were
singly caused by the banks and/or that politicians are,
de facto, better than anyone else at
redistributing wealth is an over-simplification at
best.
Even if the idea of such a tax were a
good one, have they thought through how it will work in practice
in the equity markets (let alone other asset classes)? Reports
suggest that France will go it alone
target="_blank">even if it cannot co-opt Germany
into its plan. But, around 40% of the trading in the href="http://fragmentation.fidessa.com/indexstats/euindexstats/?index=.PX1.PA&indexdesc=CAC%2040®ion=EU">CAC
40 and href="http://fragmentation.fidessa.com/indexstats/euindexstats/?index=.DAX&indexdesc=DAX®ion=EU">DAX
now occurs outside of Paris and Frankfurt (as the charts below
show) with most of this liquidity residing on London-based (and
FSA-regulated) MTFs such Bats/Chi-X and Turquoise.
href="http://fragmentation.fidessa.com/wp-content/uploads/31Jan12Tobin-or-not-Tobin1.png">
class="aligncenter size-full wp-image-3353" title="Tobin or not
Tobin_31Jan12"
src="http://fragmentation.fidessa.com/wp-content/uploads/31Jan12Tobin-or-not-Tobin1.png"
alt="" width="514" height="663" />
So, even if the French can extend their jurisdiction, it
seems unlikely that the City of London will support such a tax,
especially as any revenue raised will stay in French (and
possibly German) pockets.
Looks like it's time
that European governments recognised that, in equities trading at
least, the go it alone nationalistic approach went on the
scrapheap the moment the chaps at MiFID mansions first got their
pens out. Maybe I should drop a note directly to Monsieur Baroin
at the French Finance Ministry …
