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Eleven euro states back financial transaction tax


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http://www.reuters.com/article/2012/10/09/us-eurozone-idUSBRE8980UC20121009

 

Eleven euro zone countries agreed on Tuesday to press ahead with a disputed tax on financial transactions designed to help pay for the cost of fixing a crisis that has rocked the single currency area.

 

The initiative, pushed hard by Germany and France but strongly opposed by Britain, Sweden and other free-marketers, gained critical mass at a European Union finance ministers' meeting in Luxembourg, when more than the required nine states agreed to use a treaty provision to launch the tax.

 

The so-called "Tobin tax", first proposed by Nobel-prize winning U.S. economist James Tobin in the 1972 as a way of reducing financial market volatility, has become a political symbol of a widespread desire to make banks, hedge funds and high-frequency traders pay a price for the crisis.

 

"This is a small step for 11 countries but a giant leap for Europe," Austria Deputy Finance Minister Andreas Schieder said. "The way is now clear for a just contribution from the banking and financial sector for financing the burdens of the crisis."

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Also proposed as "a means of encouraging more responsible trading."  Meanwhile on this side of the pond:

 

http://www.cnbc.com/id/49333454 Mysterious Algorithm Was 4% of Trading Activity Last Week - Title should have read quotes rather than trades.

 

“My guess is that the algo was testing the market, as high-frequency frequently does,” says Jon Najarian, co-founder of TradeMonster.com. “As soon as they add bandwidth, the HFT crowd sees how quickly they can top out to create latency.”

 

Translation: The ultimate goal of many of these programs is to gum up the system so it slows down the quote feed to others and allows the computer traders (with their co-located servers at the exchanges) to gain a money-making arbitrage opportunity."

 

In an interview with Michael Price that another poster here linked to, he described HFT as the new way of running ahead of orders, which to me is exactly the right description.

 

I don't know if taxing orders is the way to go but something needs to be done. "Gumming up" the system should be illegal as manipulation. Maybe a tax is the way to fix it.

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