High Frequency Trading
Quick Comments on the Review of the Mifid Directive
On request from the commission we have sent in our detailed comments to the Mifid review consultation on which we have been in close touch with DG Markt. Here is our quick accessible take on some of the more controversial issues where media interest has been high.General
“The Mifid review is at least asking all the right questions. It remains to be seen what the quality of the answers is."
“In all the esoteric discussions of MTFs and High Frequency Trading and Dark Pools, it is easy to lose sight of the main purpose of markets – connecting savers and entrepreneurs so as to facilitate productive investments. The Mifid review process must not fall into this trap.”
A FIT Proposal - Financial Instrument Taxes
The world has woken up to an urgent fiscal challenge. Budget cuts will soon start to bite at home in Europe, while funding for international development and tackling climate change has already been cut. Meanwhile, the financial system that got us into this fiscal mess remains largely unreformed, with proposed changes largely neglecting the issue of systemic risks posed by financial markets in favour of ‘quick fix’ changes to the banking system. Even less has been done to align finance with the real economy.
Implementing a series of Financial Instrument Taxes (FITs) offers a highly flexible toolkit to help achieve progress on all three fronts. These are similar to, but broader than, the widely-discussed financial transaction taxes (FTTs), and can be tailored to the idiosyncrasies of particular markets. For example, more liquid markets in stocks, futures and certain derivatives will be taxed on a per transaction basis, whereas illiquid securitized products, mortgages and OTC derivatives would be taxed on issuance.
Financial Transaction Taxes: Tools for Progressive Taxation and Improving Market Behaviour
Financial Transaction Taxes: Tools for Progressive Taxation and Improving Market Behaviour. The discussion on financial transaction taxes is reaching a climax. There have been several suggestions for the form such a tax should take and many estimates for how much revenue levying such taxes would generate often running into hundreds of billions of dollars.
In a new Re-Define policy brief we have addressed the all important question of the incidence of financial transaction taxes, seeking to answer the question ‘who pays in the end’, should FTTs be widely introduced. We also demonstrate how a differentiated transaction tax regime can address market behaviour issues such as churning and excessive short termism as well as help reduce systemic risk.
