Yet again, the UK government has sided with the robotraders on a Robin Hood Tax

A financial transactions tax is the most economically efficient way to lessen the harm of HFT – but the government keeps fighting it.

Fifteen years ago the computer program Deep Blue made headlines around the world by beating chess giant Garry Kasparov. In the years since, computer algorithms have quietly gone on to dominate large parts of the financial markets.

Computer-driven trading now accounts for 70 per cent of trading in the US equity market, 36 per cent in the UK. Machines fire tens of thousands of trades a second, relying on state-of-the art technology and proximity to stock exchanges to shave microseconds off transaction times.

Yet tiny errors in the algorithms can have devastating consequences. During the infamous 'Flash Crash' of 2010 the Dow Jones index dropped nine per cent in a matter of minutes. Over the summer Knight Capital – a leading New York HFT (high frequency trading) firm – erroneously swamped the stock market with errant trades, wiping $440m from the firm's value.

That's why the European Parliament's powerful Economic Affairs Committee this week voted through legislation – the Markets in Financial Instruments Directive II – designed to curb HFT. A key proposal being that trades will have to be posted for at least 500 milliseconds (currently traders can execute 10,000 trades during the same period).

Proponents of HFT argue their churning sea of trades brings liquidity to the markets. The reality is more capricious - in times of crisis traders pull the plug, draining liquidity when it is needed most.

Adair Turner described such corners of financial markets as "socially useless". The Financial Times recently said “hard evidence and common sense point to a host of social benefits from removing unnecessary intermediation and curbing predatory trading strategies”, adding that in some areas Mifid II was simply too mild.

It's no surprise that high frequency traders themselves have mounted a defence against the reforms. What's of more concern is that in the days preceding the vote the UK Government lobbied for them to be watered-down. Its official response did not support the call for HFT firms to hold equities for a minimum period.

Yet as the Bureau for Investigative Journalism revealed last week, of a 31-member panel tasked by the UK Government to assess Mifid II, 22 members were from the financial services, 16 linked to the HFT industry. A study by the Bureau last year revealed that over half the funding for the Conservative Party came from the financial sector, 27 per cent coming from hedge funds, financiers and private equity firms. This perhaps helps explain how the interests of a select group of traders get confused with the interests of the economy as a whole.

It's a similar story for the Financial Transaction Tax. No longer a pipe dream, European Governments of all political hues, including its largest economies, are working towards its implementation by next year. The tax of between 0.1 - 0.01 per cent on financial transactions offers a more effective mechanism to limit market excesses by making certain speculative trades less profitable. But crucially, it is also capable of raising billions in much needed revenue that would ensure the financial sector pays it fair share for the damage caused to our economy.

Yet the UK Government has again chosen to stand apart in blocking a Europe wide-FTT, turning down billions in desperately needed revenue that could help save jobs, protect the poorest and avoid the worst in cuts to public services. Instead, advice of previous Party Treasurers Michael Spencer and Peter Cruddas was heeded, who infamously lobbied against the FTT. Both incidentally own multi-million pound financial firms which would be hit by such a tax.

Taken together, this tells the story of a post-financial crisis Europe: as governments embark on the arduous task of making markets once again work in the interests of society, the UK Government remains intoxicated by the Square Mile - protecting vested interests and relying on the same market principles that got us into this mess to get us out again. Best brace ourselves for a bumpy ride.

The EU Parliament. Photograph: Getty Images

Simon Chouffot is a spokesperson for the Robin Hood Tax campaign and writes on the role of the financial sector in our society.

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John Major's double warning for Theresa May

The former Tory Prime Minister broke his silence with a very loud rebuke. 

A month after the Prime Minister stood in Chatham House to set out plans for free trading, independent Britain, her predecessor John Major took the floor to puncture what he called "cheap rhetoric".

Standing to attention like a weather forecaster, the former Tory Prime Minister warned of political gales ahead that could break up the union, rattle Brexit negotiations and rot the bonds of trust between politicians and the public even further.

Major said that as he had been on the losing side of the referendum, he had kept silent since June:

“This evening I don't wish to argue that the European Union is perfect, plainly it isn't. Nor do I deny the economy has been more tranquil than expected since the decision to leave was taken. 

“But I do observe that we haven't yet left the European Union. And I watch with growing concern  that the British people have been led to expect a future that seems to be unreal and over-optimistic.”

A seasoned EU negotiator himself, he warned that achieving a trade deal within two years after triggering Article 50 was highly unlikely. Meanwhile, in foreign policy, a UK that abandoned the EU would have to become more dependent on an unpalatable Trumpian United States.

Like Tony Blair, another previous Prime Minister turned Brexit commentator, Major reminded the current occupant of No.10 that 48 per cent of the country voted Remain, and that opinion might “evolve” as the reality of Brexit became clear.

Unlike Blair, he did not call for a second referendum, stressing instead the role of Parliament. But neither did he rule it out.

That was the first warning. 

But it may be Major's second warning that turns out to be the most prescient. Major praised Theresa May's social policy, which he likened to his dream of a “classless society”. He focused his ire instead on those Brexiteers whose promises “are inflated beyond any reasonable expectation of delivery”. 

The Prime Minister understood this, he claimed, but at some point in the Brexit negotiations she will have to confront those who wish for total disengagement from Europe.

“Although today they be allies of the Prime Minister, the risk is tomorrow they may not,” he warned.

For these Brexiteers, the outcome of the Article 50 negotiations did not matter, he suggested, because they were already ideologically committed to an uncompromising version of free trade:

“Some of the most committed Brexit supporters wish to have a clean break and trade only under World Trade Organisation rules. This would include tariffs on goods with nothing to help services. This would not be a panacea for the UK  - it would be the worst possible outcome. 

“But to those who wish to see us go back to a deregulated low cost enterprise economy, it is an attractive option, and wholly consistent with their philosophy.”

There was, he argued, a choice to be made about the foundations of the economic model: “We cannot move to a radical enterprise economy without moving away from a welfare state. 

“Such a direction of policy, once understood by the public, would never command support.”

Major's view of Brexit seems to be a slow-motion car crash, but one where zealous free marketeers like Daniel Hannan are screaming “faster, faster”, on speaker phone. At the end of the day, it is the mainstream Tory party that will bear the brunt of the collision. 

Asked at the end of his speech whether he, like Margaret Thatcher during his premiership, was being a backseat driver, he cracked a smile. 

“I would have been very happy for Margaret to make one speech every eight months,” he said. As for today? No doubt Theresa May will be pleased to hear he is planning another speech on Scotland soon. 

Julia Rampen is the editor of The Staggers, The New Statesman's online rolling politics blog. She was previously deputy editor at Mirror Money Online and has worked as a financial journalist for several trade magazines.