Talking Tobin Tax: Europe Dabbled With It, China May Follow

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 ”.

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.