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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Theresa May "indifferent" towards Northern Ireland, says Alliance leader Naomi Long

The non-sectarian leader questioned whether the prime minister and James Brokenshire have the “sensitivity and neutrality” required to resolve the impasse at Stormont.

Theresa May’s decision to call an early election reflects her “indifference” towards the Northern Ireland peace process, according to Alliance Party leader Naomi Long, who has accused both the prime minister and her Northern Ireland secretary James Brokenshire of lacking the “sensitivity and neutrality” required to resolve the political impasse at Stormont.

In a wide-ranging interview with the New Statesman, Long – who is running to regain her former Belfast East seat from the DUP for her non-sectarian party in June – accused the Conservatives of “double messaging” over its commitment to Northern Ireland’s fragile devolution settlement. The future of power-sharing province remains in doubt as parties gear up for the province’s fourth election campaign in twelve months.

Asked whether she believed the prime minister – who has been roundly criticised at Stormont for her decision to go to the country early – truly cared about Northern Ireland, Long’s assessment was blunt. “We have had no sense at any time, even when she was home secretary, that she has any sensitivity towards the Northern Ireland process or any interest in engaging with it at all... It speaks volumes that, when she did her initial tour when she was prime minister, Northern Ireland was fairly low down on her list.”

The timing of the snap election has forced Brokenshire to extend the deadline for talks for a fourth time – until the end of June – which Long said was proof “Northern Ireland and its problems were not even considered” in the prime minister’s calculations. “I think that’s increasingly a trend we’ve seen with this government,” she said, arguing May’s narrow focus on Brexit and pursuing electoral gains in England had made progress “essentially almost impossible”.

“They really lack sensitivity – and appear to be tone deaf to the needs of Scotland and Northern Ireland,” she said. “They are increasingly driven by an English agenda in terms of what they want to do. That makes it very challenging for those of us who are trying to restore devolution, which is arguably in the worst position it’s been in [since the Assembly was suspended for four years] in 2003.”

The decisive three weeks of post-election talks will now take place in the weeks running up to Northern Ireland’s loyalist parade season in July, which Long said was “indicative of [May’s] indifference” and would make compromise “almost too big an ask for anyone”. “The gaps between parties are relatively small but the depth of mistrust is significant. If we have a very fractious election, then obviously that timing’s a major concern,” she said. “Those three weeks will be very intense for us all. But I never say never.”

But in a further sign that trust in Brokenshire’s ability to mediate a settlement among the Northern Irish parties is deteriorating, she added: “Unless we get devolution over the line by that deadline, I don’t think it can be credibly further extended without hitting James Brokenshire’s credibility. If you continue to draw lines in the sand and let people just walk over them then that credibility doesn’t really exist.”

The secretary of state, she said, “needs to think very carefully about what his next steps are going to be”, and suggested appointing an independent mediator could provide a solution to the current impasse given the criticism of Brokenshire’s handling of Troubles legacy issues and perceived partisan closeness to the DUP. “We’re in the bizarre situation where we meet a secretary of state who says he and his party are completely committed to devolution when they ran a campaign, in which he participated, with the slogan ‘Peace Process? Fleece Process!’ We’re getting double messages from the Conservatives on just how committed to devolution they actually are.”

Long, who this week refused to enter into an anti-Brexit electoral pact with Sinn Fein and the SDLP, also criticised the government’s push for a hard Brexit – a decision which she said had been taken with little heed for the potentially disastrous impact on Northern Ireland - and said the collapse of power-sharing at Stormont was ultimately a direct consequence of the destabilisation brought about by Brexit.

 Arguing that anything other than retaining current border arrangements and a special status for the province within the EU would “rewind the clock” to the days before the Good Friday agreement, she said: “Without a soft Brexit, our future becomes increasingly precarious and divided. You need as Prime Minister, if you’re going to be truly concerned about the whole of the UK, to acknowledge and reflect that both in terms of tone and policy. I don’t think we’ve seen that yet from Theresa May.”

She added that the government had no answers to the “really tough questions” on Ireland’s post-Brexit border. “This imaginary vision of a seamless, frictionless border where nobody is aware that it exists...for now that seems to me pie in the sky.”

However, despite Long attacking the government of lacking the “sensitivity and neutrality” to handle the situation in Northern Ireland effectively, she added that Labour under Jeremy Corbyn had similarly failed to inspire confidence.

“Corbyn has no more sensitivity to what’s going on in Northern Ireland at the moment than Theresa May,” she said, adding that his links to Sinn Fein and alleged support for IRA violence had made him “unpalatable” to much of the Northern Irish public. “He is trying to repackage that as him being in some sort of advance guard for the peace process, but I don’t think that’s the position from which he and John McDonnell were coming – and Northern Irish people know that was the case.” 

Patrick Maguire writes about politics and is the 2016 winner of the Anthony Howard Award.

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