Tobin Tax Effect on Forex | Page 3 | Forex Factory

Options

Go to
Permalinks
Print Thread

Similar Threads

Tobin Tax on currency transactions 0 replies

Anyone notice any effect of Credit on Forex? 0 replies

Will Early Time Change Effect Forex Traders? 0 replies

Any significant effect to forex market if US attacks Iran?? 2 replies

World Cups effect on forex?? 18 replies

Attachments: Tobin Tax Effect on Forex
Exit Attachments

Tobin Tax Effect on Forex

  • #41
  • Jan 10, 2012 6:14pm Jan 10, 2012 6:14pm
Quoting torkay77
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...
"Mit dem so genannten Ansässigkeitsprinzip will die EU-Kommission einer möglichen Steuerflucht oder –umgehung begegnen. Eine Finanzinstitution muss demnach zur Vermeidung der Besteuerung ihren Sitz in Land außerhalb der EU verlegen. Damit sind dien Hürden zur Steuervermeidung erheblich erhöht."

Translation for the non-German speakers:
"With the so called territorial principle, the EU Kommission wants to prevent a possible tax-evation or subvention. A financial institution must move it's location outside the EU in order to avoid the tax. This greatly increases the hurdles for tax evasion."

Cocksuckers...
  • #42
  • Jan 10, 2012 8:58pm Jan 10, 2012 8:58pm
IMO the Tobin Tax will destroy the forex market as we know it. Market makers who quote both sides (some to make lots of tiny profits, some, like some of the banks operations, just to create a market) will no longer be able to operate so spreads widen dramatically and liquidity becomes a fraction of what it is now. This means short term speculators can no longer operate due to huge spreads plus the tax, so spreads widen again and liquidity becomes a fraction of that fraction. This creates a knock on effect to mid term traders and then long term traders etc etc. With liquidity being severely reduced volatility will rise dramatically, but not the type of volatility that you and I love, it will be extremely unpredictable volatility as there will no longer be informed speculators and market makers in the market to keep things realistic. Only business transactions for real exchange of currency will be taken place. These transactions are largely random so there will be big spikes up and down and huge cost of business to the organisations that need to exchange money. It will be chaos!!!

This tax is proposed by well intentioned people who have absolutely no idea how the markets operate and have not bothered to look into it in-depth. Here is an extract from the wiki article someone posted earlier

"Even though the tax on fixed-income securities was much lower than that on equities, the impact on market trading was much more dramatic. During the first week of the tax, the volume of bond trading fell by 85%, even though the tax rate on five-year bonds was only 0.003%. The volume of futures trading fell by 98% and the options trading market disappeared. On 15 April 1990, the tax on fixed-income securities was abolished. In January 1991 the rates on the remaining taxes were cut in half and by the end of the year they were abolished completely. Once the taxes were eliminated, trading volumes returned and grew substantially in the 1990s"

Banks pay tax just like everyone else. This is the tall poppy syndrome gone mad! Yes banks make huge profits, but they also pay huge tax. I am all for bank regulation in terms of risk regulation, but this tax is going to destroy the markets and create a massive cost to EVERYONE, not just traders as all these extra costs will be passed on to the bottom of the chain - the ordinary citizen. If it is introduced it will not last long as there will be an absolute collapse of market functions and the worlds economies will come grinding to a halt. As soon as these idiots realise what they have done they will roll back the tax, but it might take decades to recover.

This tax is not the answer. A world wide tax on governments is a much more feasible solution than simply trying to steal money from the banking sector.
  • #43
  • Jan 11, 2012 2:54am Jan 11, 2012 2:54am
the Tobin Tax will destroy the forex market as ...

Totally agree it will do more damage than good...and again, who´s to be blamed but idiot politicians?

So:" To bin or not To bin, that is the question"..
The good news is if they do it, we won´t be wasting our time any more writing in these forums (and will close our trading accounts too)..

Life´s still great...
  • #44
  • Jan 11, 2012 4:05am Jan 11, 2012 4:05am
Financial Times Deutschland reported about it today.

QUOTE
"Nach dem Konzept der EU-Kommission sollen Käufe von Aktien und Anleihen mit einem Mindestsatz von 0,1 Prozent belastet werden. Für Derivate soll ein Steuersatz von 0,01 Prozent gelten. Die deutsche Regierung ist dafür, auch die sogenannten OTC-Produkte (over the counter) zu erfassen, die nicht an der Börse gehandelt werden."

Which means the EU-Comission didn't had the plan to tax OTC-products, but the Germans request that those get taxed too.
  • #45
  • Jan 11, 2012 10:05am Jan 11, 2012 10:05am
Quoting Agro
IMO the Tobin Tax will destroy the forex market as we know it. Market makers who quote both sides (some to make lots of tiny profits, some, like some of the banks operations, just to create a market) will no longer be able to operate so spreads widen dramatically and liquidity becomes a fraction of what it is now. This means short term speculators can no longer operate due to huge spreads plus the tax, so spreads widen again and liquidity becomes a fraction of that fraction.....
You are absolutely right. I am always astounded at the government's lack of ability to look at history. There's no doubt as to whether it will work or not, but how long are they going to try to jam a square peg into a round hole at our expense?

Quoting Forex5050
Financial Times Deutschland reported about it today.

QUOTE
"Nach dem Konzept der EU-Kommission sollen Käufe von Aktien und Anleihen mit einem Mindestsatz von 0,1 Prozent belastet werden. Für Derivate soll ein Steuersatz von 0,01 Prozent gelten. Die deutsche Regierung ist dafür, auch die sogenannten OTC-Produkte (over the counter) zu erfassen, die nicht an der Börse gehandelt werden."

Which means the EU-Comission didn't had the plan to tax OTC-products, but the Germans request that those get taxed too.
Translation:
"Through the concept of the EU-Comission the buying of stocks and bonds will be taxed at a minimum of .1%. For derivitives there will be a .01% tax. The German government is also advocating including the OTC-Products (over the counter) that aren't handled on the market."
  • #46
  • Jan 11, 2012 10:08am Jan 11, 2012 10:08am
Danke für die Übersetzung, hab es glatt vergessen.
  • #47
  • Jan 11, 2012 10:14am Jan 11, 2012 10:14am
i don't worry too much ... one or 2 countries alone have no control over OTC-markets anyway, so they would need a bigger solution which usually takes much time to develop..also as we know the financial industry is always smarter than politicians, so i guess they would invent some creative ways to trade forex without any t-tax
  • #48
  • Jan 11, 2012 10:14am Jan 11, 2012 10:14am
Quoting Forex5050
Danke für die Übersetzung, hab es glatt vergessen.
Nix zu danken, Kollege!
  • #49
  • Jan 11, 2012 12:18pm Jan 11, 2012 12:18pm
Quoting Agro
...steal money from the banking sector.
You gotta be kidding.

Steal money from the banking sector?

Whether the tax can be implemented successfully is another question, but you have no historical context or understanding of the privilege banks have had these past three decades.

Time to return to boring stable banking. I fail to see the value in organizations that demonstrably contribute to volatility and award ponzi schemers. Remove the crooks and reward those with long term plans. Long term greed.
  • #50
  • Jan 11, 2012 1:15pm Jan 11, 2012 1:15pm
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 underlying spot FX market.

Check out the disclaimers from FXCM or Go...
It doesn't matter if your order ends up on the IB market. As long as you deal "spot forex" through some kind of ECN/DMA whatever that also bills you correctly as one trade = 2 currency actions which get executed realtime (no matter if placed on the IB market or taken by your broker e.g. most ECNs will always take your order and send them out to IB in their own name congregated) it is spot fx and not a derivative.

Things get shady/probably taxed with pure marketmakers (most MT4/5 shops) and their EURUSDm EURUSDn EURUSD_whatever_suffix_prefix and /or which also only bill / execute one action with your trade e.g. buying EURUSD instead of buying EUR / selling USD.
  • #51
  • Edited 6:00pm Jan 11, 2012 1:49pm | Edited 6:00pm
Quoting unknown4x
It doesn't matter if your order ends up on the IB market. As long as you deal "spot forex" through some kind of ECN/DMA whatever that also bills you correctly as one trade = 2 currency actions which get executed realtime (no matter if placed on the IB market or taken by your broker e.g. most ECNs will always take your order and send them out to IB in their own name congregated) it is spot fx and not a derivative.

Things get shady/probably taxed with pure marketmakers (most MT4/5 shops) and their EURUSDm EURUSDn EURUSD_whatever_suffix_prefix...
Will have to disagree on retail traders. We are in a separate pool trading derivative spot fX contracts. Perhaps some ECN brokers do it the way you describe, but the general rule, as I understand it, is that liquidity providers or counter parties take the opposite side of your position. This does not mean that two currency actions are actually being executed.

I won't pretend I have inside information, but at least some ECNs are known to be processing derivatives trades. Just because it is ECN FX does not mean you are not trading a derivative.

ECN just means your broker is not a market maker, but matching your order (usually with counter parties or liquidity providers). This says nothing about its relationship with LPs and CPs, but that is another story.

Look here at this headline:

http://business.highbeam.com/137285/...erivatives-ecn

ECN derivatives trading... Why do you assume ECN FX is special?

Do you think that retail traders are actually swaying the underlying price of currencies? I think not. I think we're in a separate pool where we trade derivatives of actual currency pairs.

I welcome if you provide me of evidence to the contrary. I learn when I am wrong, but I do need some form of evidence that is credible.


**Please provide evidence to the contrary because I would like to know your source of information indicating that retail traders are trading in the underlying spot market. Not sure the evidence is accessible to the public... Please excuse the diversion, PipJaeger, but this issue is so fundamental.
  • #52
  • Jan 11, 2012 4:14pm Jan 11, 2012 4:14pm
I believe that greater issues are raised there, political. The recent Merkozy proposal of tighter financial coordination, was declined by Mr. Cameron, and in my humble opinion, i believe that he actually said : Our financial markets are ours to collect taxes. I ve recently listened to an operator working at LSE ( IPO sector), who said that Frankfurt markets are no threat to them. Now Merkozy, proposed that Eu has to take that piece of pie too. First thing would be raising transaction costs for all Euro denominated transactions, which of course is being done through markets, and we all know significance of LSE ..and we are not talking about IPO, but settlements as well, and other transactions. The second phaze,is about speculative trading, and there i have some doubts . Well, the total transactions of goods between US-EU , are about less then 5% of total GDP of each countries ( this numbers are from 2005-2008 , i forgot ) and therefore free floating curses should pose no threat to international trade.
All, in all ... governments and economy, have lost tremendous money and are looking to acquire more through taxes rather then printing money(which is German style).
Regarding banks,
Many have lost confidence in banking system, and they are now implementing CRS- Corporate Social Responsibility Projects, which aim to give more freedom to common investors where or which, project they would like their money invested.
I believe, that all that stuff -Corporate governance is pure wasting of time. Big decisions were made , and will be made by small group of peoples ,not majority (minority shareholders,or other stakeholders..etc). This is something to keep people busy, while they operate undisturbed until new recession.
That's my 2 cents
  • #53
  • Jan 11, 2012 9:03pm Jan 11, 2012 9:03pm
Quoting Wheels
Will have to disagree on retail traders. We are in a separate pool trading derivative spot fX contracts. Perhaps some ECN brokers do it the way you describe, but the general rule, as I understand it, is that liquidity providers or counter parties take the opposite side of your position. This does not mean that two currency actions are actually being executed.

I won't pretend I have inside information, but at least some ECNs are known to be processing derivatives trades. Just because it is ECN FX does not mean you are not trading a derivative....
Why is it special? Well the link you provided has nothing to do with forex spot trading. The reason its special is simple: it is not a derived instrument as long as you execute an on the spot same day both sides (buy EU = 2 actions - buy eur sell usd) currency transaction with a legal counterparty - be it a broker or whatever. What that broker does in house is non of your business. If it serves as a counterparty itself it is still a valid counterparty and a spot currency transaction took place. The imporant thing is that you both are exchanging two currencies on the spot and not some "derived" instrument like most isolated MT brokers do.
  • #54
  • Jan 11, 2012 10:22pm Jan 11, 2012 10:22pm
Quoting unknown4x
Why is it special? Well the link you provided has nothing to do with forex spot trading. The reason its special is simple: it is not a derived instrument as long as you execute an on the spot same day both sides (buy EU = 2 actions - buy eur sell usd) currency transaction with a legal counterparty - be it a broker or whatever. What that broker does in house is non of your business. If it serves as a counterparty itself it is still a valid counterparty and a spot currency transaction took place. The imporant thing is that you both are exchanging...
If what the broker does in house is none of my business, then how can I confirm these two transactions took place.

Your response raises red flags for me.

But no credible evidence, huh?

Makes you wonder how client money goes missing at MF Global when what brokers do in house is none of our business.

This is not to say I know one way or the other. My argument is that the best available information indicates that retail traders are typically not participating in the underlying market and trading derivatives of currency pairs.
I genuinely don't think you know any better because you have provided zero evidence.

Without tracing what brokers do in house and with LPs and CPs, the consumer has no clue. Many brokers keep the identity of their LPs and CPs secret.

But yes- the link I provided was not about spot fx - I was simply refuting your assertion that ECN trading is separate from derivatives trading. This is false.

I leave the last word with you. I am done with this topic unless you can provide some credible evidence.
  • #55
  • Jan 11, 2012 10:58pm Jan 11, 2012 10:58pm
Quoting Wheels
This is not to say I know one way or the other. My argument is that the best available information indicates that retail traders are typically not participating in the underlying market and trading derivatives of currency pairs.
I genuinely don't think you know any better because you have provided zero evidence.
This is not the topic of the thread and I don't want to get this thread leading away from the intended discussion so I will be brief, but of course retail traders are participating in the underlying market if by underlying market you mean the interbank. The spot market is actually 1000s of markets and even the interbank is not one centralised market but many liquidity pools. To say that retail traders liquidity never reaches some of these interbank liquidity pools is silly. Do you think brokers absorb all the excess liquidity that they can't match in house? If this were the case then brokers would not last long at all because as soon as this massive risk they are taking on comes to bite them in the arse they would go under. Market maker, DMA, ECN - it doesn't matter. Some or all of the liquidity taken on by these brokers will be passed through to the interbank liquidity pools somewhere down the line. Not in your name obviously though. Retail traders can and do move the interbank market to some extent.

ps You are right, spot forex is actually a derivatives market of such. The settle date is just very short (a couple of days from memory)
  • #56
  • Jan 12, 2012 2:27am Jan 12, 2012 2:27am
We really are straying from topic. If you guys want to make another thread called "Is forex a derivitives market?" that'd be better.

As far as tobin tax goes, as I've stated before, it doesn't matter if you call spot forex derivitives, not-derivitives, or a giraffe, they're gonna tax your ass.
  • #57
  • Jan 12, 2012 3:55am Jan 12, 2012 3:55am
It is none of your business what they do in the context of being taxed. You should of course know/care about what they do in house for your own moneys sake.

What matters is that they are a legal and elgible counterparty to do spot transactions with you. If they are then what they bill you / what kind of contract they have with _you_ matters. Not what they do in house. For you to be taxed or not depends on what YOU are doing with your broker. Not what your brokers does with 3rd parties.

Quoting Wheels
If what the broker does in house is none of my business, then how can I confirm these two transactions took place.

Your response raises red flags for me.

But no credible evidence, huh?

Makes you wonder how client money goes missing at MF Global when what brokers do in house is none of our business.

This is not to say I know one way or the other. My argument is that the best available information indicates that retail traders are typically not participating in the underlying market and trading derivatives of currency pairs.
I genuinely...
  • #58
  • Jan 12, 2012 6:01am Jan 12, 2012 6:01am
"As far as tobin tax goes, as I've stated before, it doesn't matter if you call spot forex derivitives, not-derivitives, or a giraffe, they're gonna tax your ass.[/quote]"


Exactly, it´s about good old $.
Not much we can do:
I´d say 50 50 chance it will pass (Merkel is getting some head winds in her Coalition team..)

And maybe 50 50 chance that it completely destroys the game, or we still can do "some trading"...maybe on Dayly Bars..

What bugs me, is it took me 15 years of studying the markets, one nice 100000 dollar account blown away back then...studied books inside out, best software, hundreds of systems... you name it...and finally, I´ve been breaking even for 2 years...and YES consistently profitable since 2 months...on 2 systems, for the first time in my "trading carreer".

And now they want it all...Tough Luck...
  • #59
  • Jan 12, 2012 6:53am Jan 12, 2012 6:53am
Gotta tell you guys I am getting a little worried again. I was worried when they first started talking about this and then it all died down. Now it is well in the forefront again. If this tax is implemented it will mean the last 10 years of my life have been a complete and utter waste of time.

So how likely is it that this tax is implemented successfully? As people have said, it will not work if it is not a global co-operative move. How likely is that? (These are questions for anyone that really knows about this stuff, not statements).

As I understand it if it is not a global move then banks will just move their opperations to the nations not implementing this tax right?

Some people have suggested that this move is partially aimed at getting speculators out of the market. This is blody typical. The powers that be build a capitalist system built on a free market, but as soon as it is not going exactly how they want then it is time to tie up the markets again. The fed are the same, they propogate a free market untill it is not going to their liking then they manipulate the market and call it intervention. Somewhere along the line these idiots decided that recessions were unaccepatable and they start taking measure to avoid them at any cost getting themselves in all sorts of trouble in the process. Just let the fucking recession hapen you half wits! Cycles are a natural function of the markets and perfectly healthy. As someone else pointed out, if they had just let the natural cycle take place we would probably be enjoing a boom right now. It is so frustrating that our lives hang in the balance of these short sighted morons, but what can we do???
  • #60
  • Jan 12, 2012 8:18am Jan 12, 2012 8:18am
Oh it will happen without a doubt, but it's not half as bad as you think unless you live in France of Germany in which case you may have an enforced trading holiday for maybe 2 years.

For one, UK - the biggest FX clearer, US and China are all dead set against it. That prevents global coordination in one foul swoop.

So the only thing that can happen is that it's introduced inside EU with UK opting out, possibly EU wide, possibly on a staged basis. France is almost certain to implement it. Whether or not it affects retail is subject to minimum £ thresholds, as yet to be decided. And yes spot fx is a derivative to whoever was asking the question, irrespective of retail or institutional.

But then what? I give it 2 years tops. Why? Because the aim is to generate revenue and reduce volatility and feel all virtuous. It'll have 180 degrees the opposite effect and cause mayhem. Here's why.
1) Specs withdraw and commercials hedge bare minimum to get buy. Lack of liquidty increases spikes
2) The multi-trillion fx turnover is illusory. HFT and delta hedging count for by far the biggest amounts of volume in FX. HFT will disappear, and delta hedging can be done on any market. So it'll simply transfer to the next available pool of liquidity without a tax (probably us $, non eu denominated instruments). This means actual revenue will be way smaller than any anticipated revenues
3) Banks will actively punish EU for screwing the system, most likely through the bond markets rather than the euro (the europeans would love to see a sink in value of eu right now). Not necessarily as a fuck you move - but because the tax will slow capital throughout the system, making it harder for businesses to operate, as well as putting in a lag to true value.
4) Virtuous - we punished the banks right? Right. And so once speculators are taken out the equation, and the problems are still there, then what? The finger of blame will come right back at the govts.

The eu govts now either take the pain if they want to survive, inflate/print the way out of it which distributes the problem to savers/elderly/other countries not QEing, or they hand over power to other nation states in a bail out.

Just to ram home the point that although the idea of tax-payers bailing out scrotes with Mazeratis makes me feel as nauseous as the next man, we are dealing primarily with a solvency crisis. Just to pluck an example - what is Italy's biggest business by turnover? It's the 4th biggest EU country by gdp. Oil maybe? Fashion house? Nope, the mafia.

http://www.telegraph.co.uk/finance/f...-business.html

Tobin will fall once all this gets shaken out, even if it takes a year or two.
0 traders viewing now