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Tobin Tax Effect on Forex

  • #21
  • Jan 10, 2012 4:05pm Jan 10, 2012 4:05pm
Quoting fxlan
The European Commission in September suggested a tax of 0.1 percent on equity and bond transactions, and 0.01 percent on derivatives, which it said could raise 55 billion euros ($71 billion) a year. European Union finance ministers are due to discuss the levy in March.

http://www.businessweek.com/news/201...ction-tax.html

I have a question. Is spot forex a derivative?
Hell yes.
  • #22
  • Jan 10, 2012 4:11pm Jan 10, 2012 4:11pm
How sure are you? I have never seen somewhere written that spot forex is a forex derivative...like for example futures or options. Just asking...i never know what to answer to this question. Been troubling me for quite some time. Is it addressed as a swap?
  • #23
  • Jan 10, 2012 4:17pm Jan 10, 2012 4:17pm
Quoting fxlan
How sure are you? I have never seen somewhere written that spot forex is a forex derivative...like for example futures or options. Just asking...i never know what to answer to this question. Been troubling me for quite some time. Is it addressed as a swap?
Whether it is a derivative or not is irrelevant, if they pass this no financial market will be left unscathed. They're basically pissed that the euro is falling and they want to place the blame on speculators.

I honestly think forex will be the first market they tax because they think it'll make their currency fluctuations less extreme.

Sweden is one of the biggest opponents of the tax because they tried it in the 80's and it nearly wrecked their economy.
http://en.wikipedia.org/wiki/Tobin_t...nsaction_taxes
  • #24
  • Jan 10, 2012 4:22pm Jan 10, 2012 4:22pm
Quoting PipJaeger

This thread was meant to start a discussion about how we forex traders should adapt if this thing does get put into effect.


Honestly, I give a f*** what they do as long as I can continue to trade and make my nut.


It is relevant. If spot forex transactions are not included (are not derivative contracts) in the tax you can continue to trade and make your nut. Dont want to talk about euro - long story. Just searching for answers.
  • #25
  • Jan 10, 2012 4:35pm Jan 10, 2012 4:35pm
Quoting fxlan
How sure are you? I have never seen somewhere written that spot forex is a forex derivative...like for example futures or options. Just asking...i never know what to answer to this question. Been troubling me for quite some time. Is it addressed as a swap?
I am 100% certain.

There is a difference between OTC spot derivatives, cleared derivatives, and other forms of retail forex trading, but spot FX trading, as a general rule, is a derivatives market.

I'm sure there are exceptions, but if we are talking about FXCM, OANDA, GO MARKETS, and these type brokers, then we are talking about derivatives.

**Exchange traded funds are a notable example differing from OTC derivatives spot FX trading. The fees are higher and the regulations are different, however.
  • #26
  • Jan 10, 2012 4:39pm Jan 10, 2012 4:39pm
As far as I know, Spot FX are not derivates. FX derivates would be FX options, swaps, futures, forwards.

But I highly doubt if the tax would get approved that the Spot market would be spared from it.
  • #27
  • Jan 10, 2012 4:41pm Jan 10, 2012 4:41pm
Quoting PipJaeger
Whether it is a derivative or not is irrelevant, if they pass this no financial market will be left unscathed. They're basically pissed that the euro is falling and they want to place the blame on speculators.

I honestly think forex will be the first market they tax because they think it'll make their currency fluctuations less extreme.

Sweden is one of the biggest opponents of the tax because they tried it in the 80's and it nearly wrecked their economy.
http://en.wikipedia.org/wiki/Tobin_t...nsaction_taxes...
Sweden failed because they did it in isolation.

France will experience the same fate if it tries to do likewise.

If international bodies worked together and made public reporting requirements a reality through public exchanges of swaps and all forms of derivatives trading, then the Tobin tax could be a resounding success.

With the banking lobby in the US, this seems like a difficult road.
  • #28
  • Jan 10, 2012 4:43pm Jan 10, 2012 4:43pm
Quoting Wheels
I am 100% certain.

There is a difference between OTC spot derivatives, cleared derivatives, and other forms of retail forex trading, but spot FX trading, as a general rule, is a derivatives market.

I'm sure there are exceptions, but if we are talking about FXCM, OANDA, GO MARKETS, and these type brokers, then we are talking about derivatives.

**Exchange traded funds are a notable example differing from OTC derivatives spot FX trading. The fees are higher and the regulations are different, however.
Thanks for the info! I will also look into the matter when i find the time. Tough times to be in this business.
  • #29
  • Jan 10, 2012 4:43pm Jan 10, 2012 4:43pm
Quoting Wheels
Sweden failed because they did it in isolation.

France will experience the same fate if it tries to do likewise.

If international bodies worked together and made public reporting requirements a reality through public exchanges of swaps and all forms of derivatives trading, then the Tobin tax could be a resounding success.

With the banking lobby in the US, this seems like a difficult road.
A resounding success? Seriously? This is a horrible idea that will just push the little guys out and give more power to the bigger players. If that's your idea of a resounding success, then maybe it will be.
  • #30
  • Jan 10, 2012 4:44pm Jan 10, 2012 4:44pm
Derivates derive their value from an underlying asset. Real Spot FX does not, we trade one currency against an other. But as I mentioned, I doubt it would be spared from the tax, if approved.
  • #31
  • Jan 10, 2012 4:54pm Jan 10, 2012 4:54pm
Quoting Forex5050
Derivates derive their value from an underlying asset. Real Spot FX does not, we trade one currency against an other. But as I mentioned, I doubt it would be spared from the tax, if approved.
No offence, but you are generally incorrect.

The foreign exchange market itself is not a derivatives market. Not all spot trading is derivatives trading either.

But you are on a website filled with primarily retail OTC traders.

OTC spot trading is derivatives trading, as is a lot of spot trading. Unless you are participating through a fund, are a bank trader, or someone else who would likely not be on this forum thread, then you would have limited access to the underlying spot FX market.

Check out the disclaimers from FXCM or Go Markets. Why would they warn you about the risk of derivatives trading if you aren't participating in a derivatives market?

As an OTC trader, your trades are being processed by liquidity providers and counter parties of sorts, but are often not placed through to the interbank market. You are speculating on the price of a currency pair, but often not participating in the spot FX market itself.
  • #32
  • Jan 10, 2012 5:00pm Jan 10, 2012 5:00pm
Quoting Wheels
No offence, but you are generally incorrect.

The foreign exchange market itself is not a derivatives market. Not all spot trading is derivatives trading either.

But you are on a website filled with primarily retail OTC traders.

OTC spot trading is derivatives trading, as is a lot of spot trading. Unless you are participating through a fund, are a bank trader, or someone else who would likely not be on this forum thread, then you would have limited access to the spot FX market.

Check out the disclaimers from FXCM or Go Markets. Why...
I thought we already settled this? It really doesn't matter what it is, it'll probably be the first thing taxed. Let's move on!
  • #33
  • Jan 10, 2012 5:08pm Jan 10, 2012 5:08pm
Quoting PipJaeger
I thought we already settled this? It really doesn't matter what it is, it'll probably be the first thing taxed. Let's move on!
It's a deal.

Going it alone won't work, so Sarkozy is taking a bit of a risk.

I support investigating and moving toward this kind of transaction tax with the caveat that it would require the participation of the US and all other European partners, and the tax scheme would have to be nuanced so that it does not mitigate all volume.

There may be a way to prohibitively tax disorderly sell offs or buy ups, but leave general transactions unscathed.

This might save the little guys playing in the spot derivatives market from huge fees. Chances are, any additional costs to banks would be passed to the consumer, but I'm not sure it OTC traders would be singled out. A profitable industry where the house (banks and brokers) win 95% of the time would die. Not sure they'd want to see this merry-go-round come to an end.
  • #34
  • Jan 10, 2012 5:16pm Jan 10, 2012 5:16pm
I actually read some official statements about not taxing spot forex.(Don´t think these politicians know much more than most of us if Forex trades are derivatives or not)..they are just experts at VOTES TRADING.
But like others correctly pointed it here,it will affect Forex anyway...

They (politicians) convinced everyone already that banks, and traders are BAD.
Everybody thinks we are all making millions everytime we click the mouse.

Who is to be blamed for the mess, the drugaddict or the pusher?. No addict no pusher.
Uncontolled credit was the culprit...specially on the housing market.
Sure the Bank is not your friend, just use it wisely: buy a house, afford the payments and youré surfing. Buy 3 houses.......2 new cars...little salary...yoré an idiot.

Now the governments, the biggest drug addicts, want to teach us (the public) how to handle the "bad, bad pusher" (Banks).
Imagine a junky on the street trying to explain to you how to handle drugs "safely".
And, trying to protect you from the pusher...with his track record...

It´s so bizarre, and people believe them....
Look at those government debts: US, Europe, SA...you name it....but we vote them...over and over again....
  • #35
  • Jan 10, 2012 5:17pm Jan 10, 2012 5:17pm
i am not a financial expert but my common sense says to me if the main purpose of the tax is to reduce speculative activity it would make not much sense if they do not include any important tradable instruments like forex, commodities, etf, options, whatever... that is target of speculative money other wise money will probably flow into the tax free markets, or not?

another point is that the tax is planned to root on "Ansässigkeitsprinzip" means based on traders tax residance..so choosing an non-Eu broker has no effect on your taxes to pay...

personally i would propose a tax exempt amount for traders of 100k (per trade)
  • #36
  • Jan 10, 2012 5:28pm Jan 10, 2012 5:28pm
Quoting cuchuflito
I actually read some official statements about not taxing spot forex.(Don´t think these politicians know much more than most of us if Forex trades are derivatives or not)..they are just experts at VOTES TRADING.
But like others correctly pointed it here,it will affect Forex anyway...

They (politicians) convinced everyone already that banks, and traders are BAD.
Everybody thinks we are all making millions everytime we click the mouse.

Who is to be blamed for the mess, the drugaddict or the pusher?. No addict no pusher.
Uncontolled...
I find it intriguing how this narrative about the evil bloated and wasteful government has infiltrated the consciousness of people the world over. Even after decades of hollowing out the state in the US, and Britain, and many other European countries, the debt remains. This is systemic and calls for a rebalancing. Talking about the government living within its means the way a household should is a weak analogy. Government has the power to grant the right to banks to print money. Banks exist by the authority granted to them. When fiscal arrangements start to affect the majority of people adversely, it's time for a rethink. Rich bond holders can afford a hair cut if it means young people without a choice aren't forced to take on debt for services and entitlements they will never receive (as they get cut).

Bankers or the government - people find a way to blame one or the other for all of the world's problems.

Alas - context and complexity will never be reflected at the ballot box. Not because people are stupid, but because government is sold to the highest bidder and uses money to manipulate the public record.

Government has a responsibility to return the world to an era of boring banking and away from this volatility. This will affect OTC spot traders, but we can only speculate how.
  • #37
  • Jan 10, 2012 5:43pm Jan 10, 2012 5:43pm
"Bankers or the government - people find a way to blame one or the other for all of the world's problems. "

But whosé to be blamed for creating debts that hardly fit in a calculator?
My simple mind has an answer: the government, wanting to please the people short term, so they will be voted again, and the Banks love the game...that in the end will be paid by the people, not the government...is that too simple?....isn´t life about common sense?
  • #38
  • Jan 10, 2012 5:46pm Jan 10, 2012 5:46pm
Quoting torkay77

another point is that the tax is planned to root on "Ansässigkeitsprinzip" means based on traders tax residance..so choosing an non-Eu broker has no effect on your taxes to pay...
Scheisse... That would be VERY bad for me. Looks like it might be time to move to Switzerland after all.

Torkay, do you have a citation for where you read that the tobin tax would fall under this principle?
  • #39
  • Jan 10, 2012 6:01pm Jan 10, 2012 6:01pm
Quoting cuchuflito
"Bankers or the government - people find a way to blame one or the other for all of the world's problems. "

But whosé to be blamed for creating debts that hardly fit in a calculator?
My simple mind has an answer: the government, wanting to please the people short term, so they will be voted again, and the Banks love the game...that in the end will be paid by the people, not the government...is that too simple?....isn´t life about common sense?
The government definitely has a role, but it's a bit more than that. I think this perspective is just a bit too simplistic, though I appreciate the sentiment.

But I will return to the key issue: the Tobin Tax.

In isolation, it will fail. Does anyone here support this initiative without qualification?
  • #40
  • Jan 10, 2012 6:06pm Jan 10, 2012 6:06pm
Quoting PipJaeger
Scheisse... That would be VERY bad for me. Looks like it might be time to move to Switzerland after all.

Torkay, do you have a citation for where you read that the tobin tax would fall under this principle?
i just read it in some news article like here

http://www.wiwo.de/politik/deutschla...p/6052108.html

i guess they will handle it like "Abgeltungssteuer", so any foreign broker will not care about it...
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