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’s it like to be a human rights activist in post-Pussy Riot Russia?

It is five years since the feminist punk collective crashed Moscow’s Cathedral in a performance that got some of them jailed.

On 21 February 2012, five brightly-dressed members of Russian feminist punk collective Pussy Riot took to the alter of Moscow’s Cathedral of Christ the Saviour to protest links between the Russian Orthodox Church and its “chief saint” Russian President Vladimir Putin. “Virgin birth-giver of God, drive away Putin!” they shouted from beneath now-iconic balaclavas.

The “Punk Prayer” was both a political statement and a powerful feminist message. Six months later, a judge sentenced three of the girls to two years in prison (one was rapidly released) on a conspicuously apolitical conviction of “hooliganism motivated by religious hatred”.

These past five years, Russia’s involvement in crises in Syria and Ukraine has cast a dark shadow over relations with an increasingly cleaved-off West. The year 2015 saw opposition politician Boris Nemtsov murdered some 500 metres from the Kremlin walls.

Domestically, society has constricted people challenging the political status quo. However, low-key initiatives retain traction.

“Artists are simply silent,” says Russian curator and gallerist Marat Guelman, who left for Montenegro in early 2015. “It is better not to say anything about politics, it is better to bypass these issues.”

This is a major difference from five years ago. “Despite persecution against Pussy Riot, people were not afraid to defend them,” he says. “It was a better time.”

There are three topics artists and curators now avoid, says artist and feminist activist Mikaela. One is “homosexuality . . . especially if it involves adolescents”, she says, citing a 2015 exhibit about LGBT teens called “Be Yourself”. Authorities closed it and interrogated the galley owner. “Then the war in Ukraine,” she says. “Russian Orthodoxy is the third topic you cannot tackle.”

Marianna Muravyeva, a law professor at Moscow’s Higher School of Economics, says that aside from the government completely discarding human rights rhetoric, the most significant legal change is the “gay propaganda” law and “legislation against those who insult the feelings of believers”.

The latter came into force in July 2013. Since then, the Orthodox Church has made deeper societal incursions. Muravyeva says that the secular nature of the Soviet Union led to residual feelings of guilt towards the Church – and now it uses that “capital”.

Mikaela observes a “cultural expansion”, citing a new TV channel, radio station and three new churches in her neighbourhood alone.

Orthodox activist attacks on exhibits have increased. In August 2015, they targeted an exhibit at one of Moscow’s most prominent art galleries. Its perpetrators were found guilty of “petty hooliganism” and handed a 1,000 rouble fine (£14 by today’s rates).

“Any word written in Old Slavonic lettering is spirituality,” says Guelman. “Any work of art by a modern artist . . . depravity, sin, the impact of the West.”

Similar groups are active across Russia, and galleries err on the side of caution. Perpetrators, while self-organised, believe their actions to be state-sanctioned, says Muravyeva. They are influenced by “the kinds of messages” conveyed by the government. 

Nowadays, self-organisation is integral to artistic expression. Mikaela witnessed educational institutions and foreign foundations telling artists “we are with you”, “we know you are smart” but they cannot host political works for fear of closure. Not knowing where the “invisible line” lies foments uncertainty. “It’s self-censorship,” she says.

Dissident artist Petr Pavlensky, notorious for nailing his scrotum to the Red Square in late 2013 (“Fixation”) and setting fire to the doors of the FSB in 2015, advocates personal agency.

“Fixation” was about a sense of helplessness in Russia that must be overcome; he tried to convey the amount of power the castrated have. “Pavlensky says, ‘Look, I have even less than you’,” says Guelman. The artist and his partner Oksana Shalygina are now in France intending to seek asylum after sexual assault accusations.

Some rise to the opportunity, such as Daria Serenko. She rides the Moscow Metro carrying political posters as part of Tikhy Piket or “Silent Protest”. Her 12 February sign depicted a girl with her head in her arms inundated by the comments received if a women alleges rape (“she was probably drunk”, “what was she wearing?”).

However, as a lone individual in a public space, she experienced hostility. “Men, as always, laughed,” she posted on Facebook afterwards. Earlier this month an anonymous group pasted painted plants accompanied by anti-domestic violence messages around Omsk, southwestern Siberia.

Their appearance corresponded with Putin signing legislation on 7 February decriminalising domestic abuse that causes “minor harm”. While it doesn’t specifically mention women, Muravyeva says that the message “women can manage on their own” is a “disaster”.

On 27 January, after Russia’s parliament passed the final draft, pro-Kremlin tabloid Life released a video (“He Beats You Because He Loves You”) showing how to inflict pain without leaving a mark.

Heightened social awareness is aided by online networks. Since “Punk Prayer”, the proportion of people using the internet in Russia has exploded. In 2011, it was 33 per cent, while in 2016 it was 73 per cent, according annual Freedom House reports. Authorities have concurrently exerted stronger controls over it, eg. targeting individual social media users through broadly-worded laws against “extremism”.

Last July, the hashtag #ЯНеБоюсьСказать (“#IamNotAfraidtoSay”) went viral. Women documented experiences of sexual violence. Russian organisation Сёстры (“Sisters”), which helps survivors receive psychological support, receives “250-350” crisis calls annually.

“Over the past year, the number of applications increased,” because of the hashtag, it says. New media platforms Meduza and Wonderzine also emerged as more “socially aware” outlets. Previously “all we had was LiveJournal communities,” Mikaela says.

Bottom-up challenges are partially due to a generational shift. “Nobody bothered before,” says Muravyeva. “Those children who were born after ‘95 . . . they were already born in a very free society – they don’t know what it is to be afraid, they don’t know what it is to be self-censoring, what it is to be really scared of the state.”

Aliide Naylor is a British journalist and former Arts and Ideas Editor of The Moscow Times.

> Now read Anoosh Chakelian’s interview with Nadya Tolokonnikova of Pussy Riot