The European Union’s Financial Transaction Tax is becoming more of a reality and less of a fanciful fantasy. The European Parliament voted today in favour of implementing a tax based upon both an "issuance principle" and a “residence principle.”
Under the issuance principle, even financial institutions located outside the EU will pay the tax when they trade securities originally issued by companies based within the EU bloc (eg. A Deutsche bank stock traded by two banks in Hong Kong would be caught). Under the “residence principle,” any institution located within the EU, will have to pay the tax whenever they trade – including if they’re trading shares issued outside the EU.
The two principles are intended to make it more difficult to avoid the tax, which the EU wants to implement by December 2013.
EU member states have a veto on tax issues and the chances of the UK agreeing to the latest proposals are approximately equivalent to the Queen abdicating to Prince Charles. As a result, two outcomes seem likely: US institutions headquartered in the UK and UK banks generally, will experience greater trading flow. EU organisations will choose to launch IPOs in London. Trading and capital markets jobs could conceivably benefit.
Trafigura is moving its legal headquarters out of Switzerland and into Singapore, where it will be hiring. (Bloomberg)
Switzerland is planning for French emigres fleeing Hollande. (Bloomberg)
Deutsche Bank’s chief risk officer says investment banks are moving to an ROE comparable to utilities and that banks need to scale back trading and focus on underwriting, market making and helping clients manage risk. (Bloomberg)
Facebook’s flop was mostly the fault of its CFO, David Ebersman, who, ‘kept a close grip on every important decision on the stock offering, not deferring to his bankers the way many companies do, according to the bankers people familiar with planning.’ (Wall Street Journal)
Seymour Pierce analyst Hugh Guy Lorriman engages in am dram productions after work. Coming soon: Of Mice and Men. (The Times)