A Robin Hood Tax will stop the machines wiping out the market

A small tax on each transaction will stop pointless yet risky high-frequency trading.

From Terminator to the Matrix, our fear that humanity may be supplanted by the machines we create has helped Hollywood make mega-bucks. But while Arnie’s cyborg killing machine and the Neo’s alternative reality remain firmly in the realms of science fiction, our financial sector’s love of a fast buck is leading us to cede control of markets to computers with sometimes disastrous consequences.

The extent to which financial markets are now dominated by computer-driven high frequency trading was revealed again last week, when Knight Capital, a leading New York trading firm made a mistake in its computer programming. The rogue programme swamped the stock market with errant trades, cost the firm $440 million and put the future of the firm in jeopardy.

So what? I hear you ask. Why should we care if a firm of traders loses millions because they rushed out a new computer programme before it was ready?

The fact is that beyond acting as a casino for traders to make or lose fortunes, financial markets are crucial to the functioning of the global economy. They are supposed to allocate resources efficiently and help firms raise capital and manage risk. When things go wrong, as in the crisis of 2008, the consequences for the real economy can be devastating.

A growing number of economists and financial experts – including more than 50 financiers who wrote a recent letter to David Cameron and other world leaders – are warning that unchecked high-frequency trading undermines markets’ economic efficiency and risks disaster. In May 2010, the most infamous "flash crash" dragged the Dow Jones index of shares down nine per cent with more than half the fall happening in just seven minutes. Shares in Accenture plunged from $40 per share to just $0.01, almost wiping out the value of the company.

High frequency trading (HFT) conducted may now account for more than three-quarters of all equity deals in the UK. When you consider that this sort of trading, managed by computers according to complex algorithms, was almost unheard of seven years ago, it is hard to avoid the conclusion that traders have been competing in a technological arms race that has left regulators floundering.

So what can be done? As anti-nuclear campaigners have discovered, it is not possible to un-invent a technology once the genie has left the bottle. But fortunately this is not necessary. High-frequency trading is only profitable because of the sheer volume of trades carried out; the profit margin on each trade is incredibly low.

A tiny tax of a fraction of a percent on each transaction would curb the worst excesses of this cyborg-style casino capitalism, while having little effect on long-term investments such as pensions where trades are carried out far less frequently.

European leaders are working towards such a tax – covering stocks, bonds and derivatives – but the UK government has chosen to side with City interests rather than back the efforts of Germany, France, Spain, Italy and others to make finance work in the interests of society rather than the other way around.

UK opposition to the tax, based as it is on the claim that such taxes have to be global to work, is somewhat ironic. The UK already has an FTT on shares, known as the Stamp Duty, which at 0.5 per cent is many times larger than the proposed European tax (0.1 per cent for shares and bonds, 0.01 per cent for derivatives). The problem is that banks, hedge funds and other high-frequency traders avoid the stamp duty by trading in derivatives.

Extending the UK’s existing FTT to derivatives and bonds would not only "throw sand in the wheels" of HFT and therefore increase stability in financial markets and the wider-economy; it would also raise billions in revenue – the reason the Robin Hood tax campaign is backed by almost 120 organisations from Oxfam to the TUC and by global figures such as Kofi Annan and Bill Gates.

Despite avoidance, the UK Stamp Duty raise £3bn a year. A full-blown FTT could raise as much as £20bn – money that could be used to help those hit by the economic crisis at home and abroad and to meet the UK’s obligations to help poor countries cope with climate change.

It can be done. The UK’s Stamp Duty is one of 40 or so FTTs that already exist around the world. Hong Kong has introduced an FTT on derivatives precisely to curb the excess of computer-driven trading. Charles Li, Chief Executive of the Hong Kong Stock Exchange, says it "effectively limits high frequency trading, just like a highway with many toll booths limits speeding."

By rejecting a broader FTT, the UK government is making its own bet on the markets. It is accepting instability and forgoing much needed revenue in the hope the City’s casino capitalism will help drive recovery from recession.

It is a risky bet. As Andrew Haldane, Executive Director of Financial Stability at the Bank of England has put it:

"Grit in the wheels, like grit on the roads, could help forestall the next crash."

"Whoa" ~ Neo, The Matrix. Do we all fear that machines will supplant us?

Jon Slater is a Senior Press Officer for Oxfam and a spokesperson for the Robin Hood Campaign

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What it’s like to fall victim to the Mail Online’s aggregation machine

I recently travelled to Iraq at my own expense to write a piece about war graves. Within five hours of the story's publication by the Times, huge chunks of it appeared on Mail Online – under someone else's byline.

I recently returned from a trip to Iraq, and wrote an article for the Times on the desecration of Commonwealth war cemeteries in the southern cities of Amara and Basra. It appeared in Monday’s paper, and began:

“‘Their name liveth for evermore’, the engraving reads, but the words ring hollow. The stone on which they appear lies shattered in a foreign field that should forever be England, but patently is anything but.”

By 6am, less than five hours after the Times put it online, a remarkably similar story had appeared on Mail Online, the world’s biggest and most successful English-language website with 200 million unique visitors a month.

It began: “Despite being etched with the immortal line: ‘Their name liveth for evermore’, the truth could not be further from the sentiment for the memorials in the Commonwealth War Cemetery in Amara.”

The article ran under the byline of someone called Euan McLelland, who describes himself on his personal website as a “driven, proactive and reliable multi-media reporter”. Alas, he was not driven or proactive enough to visit Iraq himself. His story was lifted straight from mine – every fact, every quote, every observation, the only significant difference being the introduction of a few errors and some lyrical flights of fancy. McLelland’s journalistic research extended to discovering the name of a Victoria Cross winner buried in one of the cemeteries – then getting it wrong.

Within the trade, lifting quotes and other material without proper acknowledgement is called plagiarism. In the wider world it is called theft. As a freelance, I had financed my trip to Iraq (though I should eventually recoup my expenses of nearly £1,000). I had arranged a guide and transport. I had expended considerable time and energy on the travel and research, and had taken the risk of visiting a notoriously unstable country. Yet McLelland had seen fit not only to filch my work but put his name on it. In doing so, he also precluded the possibility of me selling the story to any other publication.

I’m being unfair, of course. McLelland is merely a lackey. His job is to repackage and regurgitate. He has no time to do what proper journalists do – investigate, find things out, speak to real people, check facts. As the astute media blog SubScribe pointed out, on the same day that he “exposed” the state of Iraq’s cemeteries McLelland also wrote stories about the junior doctors’ strike, British special forces fighting Isis in Iraq, a policeman’s killer enjoying supervised outings from prison, methods of teaching children to read, the development of odourless garlic, a book by Lee Rigby’s mother serialised in the rival Mirror, and Michael Gove’s warning of an immigration free-for-all if Britain brexits. That’s some workload.

Last year James King published a damning insider’s account of working at Mail Online for the website Gawker. “I saw basic journalism standards and ethics casually and routinely ignored. I saw other publications’ work lifted wholesale. I watched editors...publish information they knew to be inaccurate,” he wrote. “The Mail’s editorial model depends on little more than dishonesty, theft of copyrighted material, and sensationalism so absurd that it crosses into fabrication.”

Mail Online strenuously denied the charges, but there is plenty of evidence to support them. In 2014, for example, it was famously forced to apologise to George Clooney for publishing what the actor described as a bogus, baseless and “premeditated lie” about his future mother-in-law opposing his marriage to Amal Alamuddin.

That same year it had to pay a “sizeable amount” to a freelance journalist named Jonathan Krohn for stealing his exclusive account in the Sunday Telegraph of being besieged with the Yazidis on northern Iraq’s Mount Sinjar by Islamic State fighters. It had to compensate another freelance, Ali Kefford, for ripping off her exclusive interview for the Mirror with Sarah West, the first female commander of a Navy warship.

Incensed by the theft of my own story, I emailed Martin Clarke, publisher of Mail Online, attaching an invoice for several hundred pounds. I heard nothing, so emailed McLelland to ask if he intended to pay me for using my work. Again I heard nothing, so I posted both emails on Facebook and Twitter.

I was astonished by the support I received, especially from my fellow journalists, some of them household names, including several victims of Mail Online themselves. They clearly loathed the website and the way it tarnishes and debases their profession. “Keep pestering and shaming them till you get a response,” one urged me. Take legal action, others exhorted me. “Could a groundswell from working journalists develop into a concerted effort to stop the theft?” SubScribe asked hopefully.

Then, as pressure from social media grew, Mail Online capitulated. Scott Langham, its deputy managing editor, emailed to say it would pay my invoice – but “with no admission of liability”. He even asked if it could keep the offending article up online, only with my byline instead of McLelland’s. I declined that generous offer and demanded its removal.

When I announced my little victory on Facebook some journalistic colleagues expressed disappointment, not satisfaction. They had hoped this would be a test case, they said. They wanted Mail Online’s brand of “journalism” exposed for what it is. “I was spoiling for a long war of attrition,” one well-known television correspondent lamented. Instead, they complained, a website widely seen as the model for future online journalism had simply bought off yet another of its victims.