Billions worth of revenue at risk from FTT, says ISLA
30 September 2015 London
Image: Shutterstock
The final version of the Financial Transaction Tax (FTT), which could affect 65 percent of the European securities lending market, is closer than ever to implementation, according to the International Securities Lending Association (ISLA).
A lessening of the tax’s impact on pension funds, and possible exemptions for repo trades, government bonds and market makers, have all been proposed recently during the ongoing negotiations of the 11 member states involved.
ISLA responded to the development by reiterating: “Applying an FTT to securities lending transactions would result in a large reduction in securities lending activity in the countries affected as the economics of these short term, low risk and return transactions, would be dwarfed by the tax.”
“This would have very negative implications for the functioning of the wider financial markets, and for the successful delivery of a European capital markets union.”
Major markets in member states such as the UK, France and Germany would all be severely impacted by the tax.
Institutional investors in Europe earned approximately €3 billion of revenue from lending their securities in 2013. It is estimated that €2 billion of revenue would be seriously at risk if the FTT is implemented on securities lending transactions, according to ISLA.
The association has also strongly advised that, due to their regulatory and economic symmetry any exemption for repos should also apply to securities lending.
A lessening of the tax’s impact on pension funds, and possible exemptions for repo trades, government bonds and market makers, have all been proposed recently during the ongoing negotiations of the 11 member states involved.
ISLA responded to the development by reiterating: “Applying an FTT to securities lending transactions would result in a large reduction in securities lending activity in the countries affected as the economics of these short term, low risk and return transactions, would be dwarfed by the tax.”
“This would have very negative implications for the functioning of the wider financial markets, and for the successful delivery of a European capital markets union.”
Major markets in member states such as the UK, France and Germany would all be severely impacted by the tax.
Institutional investors in Europe earned approximately €3 billion of revenue from lending their securities in 2013. It is estimated that €2 billion of revenue would be seriously at risk if the FTT is implemented on securities lending transactions, according to ISLA.
The association has also strongly advised that, due to their regulatory and economic symmetry any exemption for repos should also apply to securities lending.
NO FEE, NO RISK
100% ON RETURNS If you invest in only one securities finance news source this year, make sure it is your free subscription to Securities Finance Times
100% ON RETURNS If you invest in only one securities finance news source this year, make sure it is your free subscription to Securities Finance Times
