“ tax on financial transactions would be a gift to the unre­ ­ A                                                          ...
The objectives of the financial                                           The FTT will force the wrong partiest­rans­ ctio...
The objectives of the financial                                           The FTT will force the wrong partiest­rans­ ctio...
“ tax on financial transactions would be a gift to the unre­ ­ A                                                          ...
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Will the Financial Transaction Tax achieve its objectives?

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In line with the G-20, the European Union has set three justifiable objectives for regulating the European financial markets: strengthen transparency, increase stability and ensure that
the financial sector shares in the costs of the crisis. As a provider of reliable and highly regulated market infrastructures, Deutsche Börse Group strongly supports the pursuit of transparency and stability in the financial system.
In suggesting a financial transaction tax (FTT), the EuropeanCommission is adding its support for these objectives. It is, however, questionable whether the objectives can be achieved with such a tax.

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Will the Financial Transaction Tax achieve its objectives?

  1. 1. “ tax on financial transactions would be a gift to the unre­ ­ A g ulated and non-transparent financial centres of the world. Only sustainable strengthening of the regulated markets e ­ nsures greater transparency and stability.” Dr Stefan Mai Head of Market Policy European Public Affairs, Deutsche Börse Group Will the financial t ­rans­ ction tax achieve a its ­ bjectives? oPublished byDeutsche Börse AG60485 Frankfurt/MainGermanywww.deutsche-boerse.comPhone +49-(0) 69-2 11-1 39 80Fax +49-(0) 69-2 11-1 39 81Email info@deutsche-boerse.comFebruary 2012Order number 1012-4297
  2. 2. The objectives of the financial The FTT will force the wrong partiest­rans­ ction tax a to share in the costs of the crisisIn line with the G-20, the European Union has set three justi­ It is unlikely that the financial transaction tax will be able tofiable objectives for regulating the European financial markets: meet the financial expectations that have been placed on it.strengthen transparency, increase stability and ensure that E ­ mpirical studies have concluded that by moving financialthe financial sector shares in the costs of the crisis. As a pro- t ­ransactions beyond the scope of the tax’s applicability itsvider of reliable and highly regulated market infrastructures, p ­ otential revenue will be lower by up to two thirds than expected.Deutsche Börse Group strongly supports the pursuit of trans­ And the lion’s share of the desired financial ­ ontribution will cparency and stability in the financial system. not stem from those who caused the crisis. In fact, the opposite is true; small and medium-sized companies in particular willIn suggesting a financial transaction tax (FTT), the European face higher capital-raising costs as a result of rising transactionCommission is adding its support for these objectives. It is, costs. Savers and private households would also suffer greaterh­ owever, questionable whether the objectives can be achieved financial losses as the tax would directly hit their retirementwith such a tax. provision ­ roducts. pThe FTT will result in less transparency Potential conflict between objectives and impacts of a financial transaction taxThe financial transaction tax will increase transaction costs inEuropean financial centres. This will result in a huge shift of 3 justifiable regulatory objectivesf­inancial activities to non-transparent and unregulated markets.The tax thus benefits all those who reject the lessons of the n  uropean financial market transparency must be improved. E   inancial system stability must be strengthened. Ffinancial crisis and plan to continue their trading activities ­ utside o n financial sector should make a fair and substantial contribution n  Thethe scope of regulatory supervision. In so doing, it ­ eakens w to the costs of the crisis.p­ recisely Europe’s regulated and transparent market ­nfrastructure iand consequently also contradicts the regulatory measures takenin the past years, such as the European Market InfrastructureRegulation (EMIR). 3 undesirable impacts n  inancial transactions will migrate to unregulated and non-transparent F markets.The FTT will affect system stability n  ystemic risks will remain unchanged; they will only fall out of scope of S the regulator’s surveillance and control.The migration of financial activities to non-regulated niches n  The tax burden will be borne by parties uninvolved in the financial crisisputs them beyond the reach of European regulators. However, (real economy, savers).Europe still remains subject to the risk of many transactions.In a globally linked financial system there is no longer anyp­ hysical relationship between the location in which a transactionis concluded and the location exposed to the risk.
  3. 3. The objectives of the financial The FTT will force the wrong partiest­rans­ ction tax a to share in the costs of the crisisIn line with the G-20, the European Union has set three justi­ It is unlikely that the financial transaction tax will be able tofiable objectives for regulating the European financial markets: meet the financial expectations that have been placed on it.strengthen transparency, increase stability and ensure that E ­ mpirical studies have concluded that by moving financialthe financial sector shares in the costs of the crisis. As a pro- t ­ransactions beyond the scope of the tax’s applicability itsvider of reliable and highly regulated market infrastructures, p ­ otential revenue will be lower by up to two thirds than expected.Deutsche Börse Group strongly supports the pursuit of trans­ And the lion’s share of the desired financial ­ ontribution will cparency and stability in the financial system. not stem from those who caused the crisis. In fact, the opposite is true; small and medium-sized companies in particular willIn suggesting a financial transaction tax (FTT), the European face higher capital-raising costs as a result of rising transactionCommission is adding its support for these objectives. It is, costs. Savers and private households would also suffer greaterh­ owever, questionable whether the objectives can be achieved financial losses as the tax would directly hit their retirementwith such a tax. provision ­ roducts. pThe FTT will result in less transparency Potential conflict between objectives and impacts of a financial transaction taxThe financial transaction tax will increase transaction costs inEuropean financial centres. This will result in a huge shift of 3 justifiable regulatory objectivesf­inancial activities to non-transparent and unregulated markets.The tax thus benefits all those who reject the lessons of the n  uropean financial market transparency must be improved. E   inancial system stability must be strengthened. Ffinancial crisis and plan to continue their trading activities ­ utside o n financial sector should make a fair and substantial contribution n  Thethe scope of regulatory supervision. In so doing, it ­ eakens w to the costs of the crisis.p­ recisely Europe’s regulated and transparent market ­nfrastructure iand consequently also contradicts the regulatory measures takenin the past years, such as the European Market InfrastructureRegulation (EMIR). 3 undesirable impacts n  inancial transactions will migrate to unregulated and non-transparent F markets.The FTT will affect system stability n  ystemic risks will remain unchanged; they will only fall out of scope of S the regulator’s surveillance and control.The migration of financial activities to non-regulated niches n  The tax burden will be borne by parties uninvolved in the financial crisisputs them beyond the reach of European regulators. However, (real economy, savers).Europe still remains subject to the risk of many transactions.In a globally linked financial system there is no longer anyp­ hysical relationship between the location in which a transactionis concluded and the location exposed to the risk.
  4. 4. “ tax on financial transactions would be a gift to the unre­ ­ A g ulated and non-transparent financial centres of the world. Only sustainable strengthening of the regulated markets e ­ nsures greater transparency and stability.” Dr Stefan Mai Head of Market Policy European Public Affairs, Deutsche Börse Group Will the financial t ­rans­ ction tax achieve a its ­ bjectives? oPublished byDeutsche Börse AG60485 Frankfurt/MainGermanywww.deutsche-boerse.comPhone +49-(0) 69-2 11-1 39 80Fax +49-(0) 69-2 11-1 39 81Email info@deutsche-boerse.comFebruary 2012Order number 1012-4297

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