Talking Tobin Tax: Europe Dabbled With It, China May Follow
Transactional taxes on financial products have been a hot topic recently.
Transactional taxes on financial products have been a hot topic recently.
In the equities market, these taxes are designed and proposed to reduce high frequency, thin layers of “liquidity”.
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The same goes for FX, but the sheer volume in FX will cause a transaction tax to have an astronomical impact on traders. As we all know , the volume in FX dwarfs equities volume and business offering FX are much more fluid in terms of what jurisdiction they set up shop.
If a Tobin-like tax gets implemented, look for traders to move their accounts away from jurisdictions implementing this tax. In many cases, this will force retail clients into holding accounts in a higher risk jurisdiction. A Tobin-like tax is terrible for the industry as a whole.
I am very much in agreement Jeff. If we break it down into regions, though, it is my opinion that European tobin tax is more concerning than anything put in place by China. In China, it doesnt matter if it is implemented or not, nobody trades there and the FX traders in China are retail traders who take their money out and trade with foreign companies, so they are subject to the rules of those jurisdictions rather than China. Theoretically it is not legal for Chinese traders to move their funds abroad, but once deposited with a foreign company, there… Read more »
Europe never dabbled with the Tobin tax – even in the draft from the European Commission(that is off the table now anyways) spot FX was always exempt from the transaction tax.