A new agreement on investment firms levels the playing field by differitation of investment firmsRead More
The EU adopted the regulation of mandatory central clearing for IRS related products today. A couple of months and perhaps some more parliamentary scrutiny before they go into effect and then the countdown begins.Read More
Yesterday the EU stated that the EU commission is close on reaching a compromise on the discussed Financial Transaction Tax (FTT). The full Bloomberg article can be found here
It is interesting to note that the EU members remain divided over introducing an FTT, the possible compromise would still be without the UK and the Netherlands participating. The European Banking Union rightfully noted that an introduction of FTT in only some countries of the EU would be inconsistent with the EU efforts to build a capital markets union.
In the States meanwhile, Presidential hopefull Bernie Sanders made FTT a part of his campaign, stating that he would tax 50 cents on every 100 USD traded in equity value to provide better education and shrink trading (effectively killing HFT). According to him, both moves would improve and stabilize the economy. Realistically, it will be a cold day in hell when he gets elected but it does show that FTT is still far from dead and still a great tool for politicians to rally the masses.
Meanwhile it would be good to step away from the rhetoric and look at some studies conducted on the effects of FTT. In our studies collection there is a very interesting study from the University of Duisburg. They looked at Italy where FTT was already introduced and measured its effect. They saw an increase in volatilty and a widening of spreads. Read the article here.
Another interesting document is a study done by the City of London Corporation (perhaps not completely unbiassed). They used another angle and researched how an FTT would affect household savings. That is one of the things that usually gets lost in all the rhetoric of the FTT proponents, at the bottom line it will be the end-client that pays the bill.
Bruegel is a EU think tank based in Brussels. According to this article in Reuters they have now spoken out against a number of issues that the industry have been rallying against for quite some time. These arguments are now picked up by the Latvian presidency of the EU and quoted in papers for the EU finance ministers.
Bruegel states that an FTT as wanted by 11 EU countries may be detrimental to economic development. They also suggest that the EU should wait with further legislation to have banks isolate their trading activities (market making).
According to Bruegel, the EU needs to set a clear list of priorities to create a true Capital Markets Union (CMU). A CMU can stimulate growth in the EU.