William Mitting argues that the introduction of a financial transaction tax in Europe is causing unecessary complexity and highlights structural flaws in the EU.
"It was the bankers what did it" has been the prevailing
wisdom among regulators since the financial crisis and the
myriad of regulation hitting the industry stands testament to
that. However, the financial transaction tax is proving to be
one of the most misguided attempts to right the perceived
wrongs in Europe.
Europe, unlike the United States, is not a homogenous state.
And as Germany and Italy both enter election years, governments
there are feeling the pressure to assuage popular anger with
the early introduction of transaction taxes ahead of a wider
European implementation and following in the wake of
It is this individual approach that will cause the most
disruption to markets and crucially how high-frequency trading
plays a role in the financial transaction tax (something of a
tautology as HFT will be the hardest hit by the FTT).
Just before Christmas, the Italian parliament passed
legislation to introduce a financial transaction tax. The
Italian FTT is a masterpiece of regulatory complexity. The tax,
which will be 0.22% on OTC transactions and 0.12% on trades
executed on regulatory exchanges or MTFs within the EU or the
European Economic Area (Iceland, Lichtenstein and Norway), will
apply to all securities and derivatives thereof of Italian
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