Greek Bailout and Forex Tax News
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We should be paid for this.
Yesterday our early morning comment emphasised that the Northern European States would eventually fall into line and prop up the PIGS.
The thinking was that the whole project is essentially a political one rather than an economic one. Lo and behold, before the day was even up the Germans had effectively capitulated and promised to sign the cheque.
The rebound in the EUR/USD was the immediate reaction but in the belief of this commentator this is very short sighted.
Long term, the Euro would have been better off by playing hard ball with the profligate south and, if necessary, actually kicking out non compliant member states.
Now the EU project will commit to throwing good money after bad to the detriment of the currency as a whole.
The squeeze on the shorts may have had an immediate impact and this may go on for a while but the fact is that the Greek budget proposals are very mild and go nowhere near a solution to the overall problem.
In fact they are considerably weaker than the Irish budget proposals of a few months ago and nobody was rushing to the aid of the Emerald Isle.
This is yet another political solution, by which I mean just printing more money, to an economic problem. It commits the Northern States to spending even more and this is on top of all the other various calls and commitments on Treasury purses that have been promised over the last couple of years.
Today also sees the ill informed Robin Hood tax proposal from various ‘interested parties’.
It is curious how keen people are on a Tax that they believe will not affect them personally but will be inflicted on other people who they do not like much anyway.
The 0.05% proposed tax sounds tiny and every one always uses the sum of 5p on £1,000 transaction to portray its limited impact.
Unfortunately this merely shows up their ignorance of the sums actually involved in financial transactions.
Forex is traded in millions, not £1,000, and the cost of transaction at the moment for, say, a £1,000,000 GBP/USD deal is around $12 to $15 in total. This is currently divided between the broker, the clearer and the platform provider etc.
To add 0.05% on this would be £50, or $78 at current exchange rates.
This is at least FIVE times more than the total cost of the deal at the moment and this would be on top of the current fee.
If campaigners really believe that the currency market will just stand idly by and accept this they are sadly mistaken.
The entire market will just up sticks and move to whichever jurisdiction does not impose the tax, and you can bet your bottom Dollar that many will not.
LCG is just a very small Forex provider but even we transact some $2 billion a day across our platforms. On this we make about $5 to $8 per million revenue on average.
A 0.05% fee on this would mean our tiny company paying some $100,000 a day in new taxes. About 15 times the total profit, after costs, made by the actual company.
Forex Spread Betting Comparison
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| GBP / USD Daily - Spread Size |
2 |
2 |
2 |
3 |
0.8 |
2 |
3 |
2 |
| GBP / USD Daily - Min Stake |
£1 |
£0.50 |
£1 |
£0.5 |
£1 |
£1 |
£1 |
£1 |
| GBP / USD Future - Spread Size |
8 |
12 |
8 |
8 |
- |
8 |
16 |
8 |
| GBP / USD Future - Min Stake |
£1 |
£1 |
£1 |
£1 |
- |
£1 |
£1 |
£1 |
| EUR / GBP Daily - Spread Size |
1 |
2 |
1 |
1 |
1 |
1 |
2 |
1 |
| EUR / GBP Daily - Min Stake |
£1 |
£0.50 |
£1 |
£0.5 |
£1 |
£1 |
£1 |
£1 |
| EUR / GBP Future - Spread Size |
6 |
10 |
6 |
6 |
- |
6 |
17 |
6 |
| EUR / GBP Future - Min Stake |
£1 |
£1 |
£1 |
£0.5 |
- |
£1 |
£1 |
£1 |
| EUR / USD Daily - Spread Size |
1 |
1 |
1 |
2 |
0.8 |
1 |
2 |
1 |
| EUR / USD Daily - Min Stake |
£1 |
£0.50 |
£1 |
£0.5 |
£1 |
£1 |
£1 |
£1 |
| EUR / USD Future - Spread Size |
8 |
12 |
8 |
8 |
3 |
8 |
12 |
8 |
| EUR / USD Future - Min Stake |
£1 |
£1 |
£1 |
£1 |
£1 |
£1 |
£1 |
£1 |
| USD / JPY Daily - Spread Size |
1 |
1 |
1 |
2 |
0.8 |
1 |
2 |
1 |
| USD / JPY Daily - Min Stake |
£1 |
£0.50 |
£1 |
£0.5 |
£1 |
£1 |
£1 |
£1 |
| USD / JPY Future - Spread Size |
8 |
12 |
8 |
10 |
- |
8 |
14 |
8 |
| USD / JPY Future - Min Stake |
£1 |
£1 |
£1 |
£0.5 |
- |
£1 |
£1 |
£1 |
Comparison Notes
The above comments do not constitute investment advice and neither Financial Spreads nor Clean Financial accept any responsibility for any use that may be made of them.
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'Greek Bailout and Forex Tax News' edited by DB, updated 10-Feb-10
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