William Watts's Forex Files: Transaction tax could boost London role

By William L. Watts, MarketWatch

FRANKFURT (MarketWatch)?Funny how things work out.

After all, the raison d??tre behind the French-led push for a European financial-transaction tax is to ensure that bankers and others bearing the blame for the global financial crisis pay their fair share to clean up the mess.

in 2010

country	percentage
Britain	36.7
U.S.	18.0
Japan	6.2
Singapore	5.3
Switzerland	5.3
France	3.0
Germany	2.1
Italy	0.6

Source: The Bank for International Settlement /conga/story/2012/03/forex_turnover.html 196819

Yet, given the dynamics of European politics, it appears likely that any imposition of a transaction tax will redound to the benefit of London, arguably already the world?s most important financial center and a bastion of the ?Anglo-Saxon? style shenanigans French President Nicolas Sarkozy has spent years railing against.

And its London?s currency traders that could benefit most of all.

It?s all relatively simple. Sarkozy, trailing his Socialist challenger Fran?ois Hollande in the run-up to this spring?s presidential elections, has already vowed to unilaterally implement some form of transaction tax in August.

The tax would create a ?shock wave,? Sarkozy told French television in January, ensuring that ?those who helped bring about the crisis? pay to restore public finances.

Meanwhile, the European Commission has drawn up its own plans for a European Union-wide tax. And Sarkozy and other European officials would still like to see a global transaction tax on the agenda at the Group of 20.

Calls for a global tax appear to have little momentum.

It?s also clear that any Europe-wide effort won?t include Britain, where Prime Minister David Cameron remains certain to veto any measure that would undercut the City of London, which accounts for around three-quarters of financial transactions in the EU.

Britain accounted for nearly 40% of the global-forex-market turnover in 2010.

Given that roadblock to a European Union-wide tax, German Chancellor Angela Merkel and Italian Prime Minister Mario Monti in January indicated they were open to the notion of a tax that would apply across just the 17-nation euro zone.

Merkel and Monti have since appeared lukewarm to the notion. A meeting of European Union finance ministers on March 13 may be crucial in determining where the proposals go next.

But a quick look at the numbers indicates any such move would only serve to cement London?s lock on its role as the world?s global, forex-trading capital.

The Bank for International Settlement?s latest triennial central bank survey from 2010 showed that Britain accounted for 36.7% of the daily, global-forex-market turnover, up from 34.6% in 2007 and from just under 30% in 1995.

That is a $1.854 trillion chunk of a $5-trillion-plus pie.

Source: http://feeds.marketwatch.com/~r/marketwatch/financial/~3/b5N0faGAL6U/story.asp

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