Could An EU Transaction Tax Pose A Bigger Threat To Traders Than Brexit?

Talks among 10 European countries for a financial transaction tax have dragged on since 2011 as the countries involved have struggled to agree what instruments should be covered and at which tax rate. However, Germany and France continue to lead efforts to create the tax which is supposed to help recover public funds used to bail out banks during the financial crisis, while curbing speculative trading. This has posed the question, could this be a bigger threat to financial markets than the Brexit Brexit Brexit stands for British Exit, or in reference to the United Kingdom’s decision to formally leave the European Union (EU) as declared in a June 23, 2016 referendum. In a more immediate sense, a tight vote and unexpected result helped drive British pound (GBP) to lows that had not been seen in decades.The day following the referendum, former Prime Minister David Cameron resigned from office where he was replaced by Theresa May, who later resigned from office on June 7th, 2019. Active Prime Minis Brexit stands for British Exit, or in reference to the United Kingdom’s decision to formally leave the European Union (EU) as declared in a June 23, 2016 referendum. In a more immediate sense, a tight vote and unexpected result helped drive British pound (GBP) to lows that had not been seen in decades.The day following the referendum, former Prime Minister David Cameron resigned from office where he was replaced by Theresa May, who later resigned from office on June 7th, 2019. Active Prime Minis Read this Term?

The tax on financial transactions is regarded by some as a prospect so alarming to the continent’s traders that one company in the Netherlands has already prepared contingency plans to relocate to the U.K. or Switzerland.

Bloomberg cites Flow Traders NV, an electronic market maker, that argued that it would have to move its headquarters if the Dutch authorities impose the tax. A British decision to exit the European Union, however, could actually benefit Flow Traders as it would increase Volatility Volatility In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, or stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Trad In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, or stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Trad Read this Term. High-speed traders regularly see their profits climb as market gyrations lead to greater trading volumes.

Dennis Dijkstra, the co-chief executive officer of Flow Traders, commented to Bloomberg: “We have a plan B ready if the Dutch government would ever adopt these kinds of plans. If the Dutch government imposes a financial-transaction tax that is source-based, we will have to move to the U.K. or Switzerland. We’re prepared.”

Even though the Netherlands is not included in the 10 countries looking to introduce the tax, the country’s traders could still end up paying it depending on the outcome of next year’s parliamentary elections. The present Dutch government does not intend to enforce the levy.

While Flow Traders regards the tax on transactions as a risk, it is relatively comfortable about a possible British vote to leave the EU and that from a trading perspective, it could have positive implications in that it will lead to higher volumes and short-term volatility.

Despite the fact that recent talks held were deadlocked, French Finance Minister, Michel Sapin, last month told a news conference that the European Union's current presidency had not abandoned hopes of reaching an agreement in June 2016.