2012-01-17-奥纬咨询-Proposed_EU_Commission_Financial_Transaction_Tax_-_Impact_Analysis_of_Foreign_Exchange_Markets_28页_867kb

Proposed EU Commission Financial Transaction Tax Impact on Foreign Exchange Markets Summary

Executive Summary

The EU-wide Financial Transaction Tax (FTT) is intended to increase transaction costs for all FX cash (forwards, swaps) and derivative (options) products. Higher costs disproportionately affect highly liquid products like short-dated FX swaps. The tax is expected to drive significant trade relocation outside the EU, leading to reduced liquidity and further cost increases. This burden predominantly impacts the real economy, including pension funds, asset managers, insurers, corporates, and asset managers, as transaction costs are mostly passed on to them. The tax is inefficient overall, with increased transaction costs outweighing the tax revenue, and may increase price volatility and spread sizes.

Introduction

This report evaluates the impact of the EU-proposed FTT on the FX markets, quantifying primary impacts (cost increase, trade relocation, substitution) and secondary impacts (reduction in liquidity). Studies suggest minimal impact on speculative trading due to portability, with relocation being the dominant effect. Notional turnover in FX cash and derivatives in Europe is expected to decline by 70-75% due to relocation and reduced speculative activity.

Impact Analysis

• Direct Impact: Transaction costs (0.01% for derivatives, 0.1% for securities) rise significantly, with short-dated FX swaps experiencing a relative increase of up to 1790%.
• Indirect Impact: Reduced liquidity leads to wider bid-ask spreads (up to 110% widening for liquid pairs) and higher volatility.
• Relocation: Over USD 1.6 trillion in daily average volume in FX products could relocate, reducing notional turnover by 70-75%.
• Speculative Trading: High-frequency trading volume in cash/derivatives may decrease by 1% globally, and 6% in intra-EU trades.

Conclusions

The EU FTT would hike transaction costs and trade volumes significantly due to relocation effects, negatively impacting market liquidity and necessitating tax-bearing entities to absorb higher costs. Estimated volume relocation reduces EU FX turnover dramatically, leading to broader economic costs outweighing the tax revenue.

Summary extracted from the provided report.