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THURSDAY TICKER: 31ST JULY 2014 - Standard & Poor's says Argentina is in selective default on foreign-currency-denominated debt, after the government failed to make a $539m payment on $13bn in restructured bonds. Argentina had transferred the money to the paying agent, but a US judge would not allow its release unless hedge funds holding bonds not included in a restructuring also were paid. The latest default is expected to exacerbate problems in Argentina's recession-hit economy, analysts say. This is the second time Argentina has defaulted on its debt in the last thirteen years, after last-minute talks in New York with a group of bond-holders ended in failure. Vulture fund" investors were demanding a full pay-out of $1.3bn (£766m) on bonds they hold. Argentina has said it cannot afford to do so, and has accused them of using its debt problems to make profits - In a regulatory filing made public earlier this week, and US press reports, BlackRock has begun the process of establishing a Wholly Foreign-Owned Enterprise (WFOE) in Shanghai. The firm is reportedly creating an investment advisory WFOE which will give it significantly greater flexibility and speed in executing its Greater China strategies – Shares in Chinese footwear manufacturer Feike AG have been listed on the General Standard of the Frankfurt Stock Exchange. Ten million shares have been listed at an initial price of €7.50. ACON Aktienbank AG is supporting the issue. Scheich & Partner Börsenmakler GmbH is the specialist. This is the third Chinese company to list on the exchange according to managing director Michael Krogmann. “With the IPO we have achieved an important strategic milestone. This helps us to expand our competitive position and our brand awareness in the booming Chinese market for children’s footwear as well as to realise future growth plans”, says Andy Hock Sim Liew, CFO of Feike AG - Funding pressures stemming from reduced central government capital grants and the persistence of tightened long-term bank lending are likely to fuel the English housing association sector's continued use of capital markets over the next two years, says Moody's Investors Service in a new report published today. The new report English Housing Associations: Financial Disintermediation- A One Way Trip, is the third in a series on European sub-sovereigns' financing needs and access to market funding.

EU’s threatened financial transaction tax could magnify FX costs

Friday, 03 February 2012
EU’s threatened financial transaction tax could magnify FX costs An EU financial transaction tax (FTT), could increase FX transaction costs, says Oliver Wyman research. http://www.ftseglobalmarkets.com/

An EU financial transaction tax (FTT), could increase FX transaction costs, says Oliver Wyman research.

Research by oliver Wyman, commissioned by the Global Financial Markets Association’s (GFMA’s) global FX division, suggests that, given the tight margins that exist in foreign exchange markets, any increase in transaction costs will, in turn, hit the real economy as these costs would largely be passed on to all end users. The report, Proposed EU Commission Financial Transaction Tax; Impact Analysis of Foreign Exchange Markets’, evaluates the impact of the European Union’s proposed financial transaction Tax (FTT) on European FX markets, estimating its impact on FX cash and derivatives users in particular.
The report not only recognises that the primary impact of the tax will be an increase in transaction costs, relocation of trading and reduction in notional turnover, but also it suggests the tax will result in a potential reduction in liquidity leading to a widening of bid/ask spreads.
The research suggests that a proposed FTT could directly increase transaction costs for all transactions by three to seven times and by up to 18 times for the most traded part of the market. It could eventually result in the relocation between 70% and 75% of tax eligible transactions outside of the EU tax jurisdiction. This possible outcome, combined with reduced transaction volumes (of approx 5%), could reduce market liquidity and increase indirect transaction costs by up to a further 110%, the report suggests.
Inevitably however, the tax will predominantly hit the real economy and the institutional market, comprising pension funds, asset managers, insurers and corporations, as both direct and indirect costs are largely passed on to end‐users, which will be least able to move transactions to jurisdictions not subject to the tax.
While the tax is expected to only have a limited impact on speculative trading, as this activity will most likely relocate outside the EU tax jurisdiction, it will result in an inefficient tax on the economy as raising €1 of tax would likely cost the economy more than €1, due to the indirect costs associated with reduced and more fragmented liquidity.
James Kemp, managing director of GFMA’s global FX division, says:  “It is essential to fully understand the impact of the proposed financial transaction tax and the Oliver Wyman study is an important contribution to the debate. “The foreign exchange industry is an essential part of a stable and sustainable economy, underpinning international trade and investing. This study shows that the proposed tax would in effect penalise Europe’s businesses for sensible risk management—by using FX products to manage currency fluctuations—and also threaten to impose further costs on the investment returns of pension funds and asset managers.”
UK premier David Cameron led a charge against the tax at the Davos World Economic Forum in late January, telling Eurozone members that it was no time for tinkering in the financial markets and that the tax was “madness”.

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