In Brussels, trading is the new smoking
The Belgian government proposed an hilarious tax two months ago. Short term profits will be taxed (33%) for retail investors. Losses aren’t taken into account. The idea is the capital markets are bad, just like smoking or alcohol.
Slowly, details emerge. All exchange traded instruments are assumed to be within the scope of the tax. It is confirmed CFD’s (like from IG) are exempt, because not traded on exchange. Also exempt seem to be ETF’s (nice for Flow Traders).
Brussels option market at risk
Brussels has an option market, but under the proposed tax it is finished. There seems to be a lack of basic option understanding at the government in Brussels. Taxing only the winning options makes no sense.
Let’s assume, for the sake of the argument, you buy a simple call spread with strike 12 (long) and 14 (short). Stock goes through the roof, to €100. Well done, your spread will be worth €2. Taxman wants to collect €26,40. That happens when you ignore losing legs in a spread.
ABN options at EUREX
Eurex was a bit late to the party. ABN AMRO options are introduced today under code AAR. This means the same options are traded on three option exchanges. While Euronext still has the ABN options categorized as spotlight options with only the first three months – they will be promoted to regular options. This means there is space for six “primary market makers” on Euronext.
Crowded options
Currently there are seven pmm‘s. One needs to go. Not such a big deal, but curious to see who needs to give up some capacity and join Commerzbank as “competitive market maker”.
- Scrocca
- 323
- Webb
- Susquehanna
- IMC
- Optiver
- Nino
I expect Optiver to be dropped from the list of PMM’s. The reason is Euronext is taking into account the number of alternative liquidity providing roles each firm is maintaining. And Optiver is only involved in the few large cap stock options (bigger fish to fry).
Johannah Ladd to leave FIA EPTA
After two years at the helm of the HFT lobby group FIA EPTA, Johannah Ladd will leave on January 1st. She has concentrated efforts against a proposed financial transaction tax and the impact of strict bank-like reg cap rules for prop trading firms. She also helped to make sure MiFID II’s market making provisions won’t cripple liquidity providers. With her legal background (Flow Traders) and communication skills she’ll be a good catch for any financial institution. Tough she may risk her place on the list of “100 most influential women in finance”. She was on the list in 2014 and 2015.
Ms. Ladd was also interviewed in an article on the Dutch market in Automated Trader (ah well, me too). Here’s the interesting interview, in a large 5mb PDF. Here’s the official press release from FIA EPTA.
Euronext and Virtu to appeal against fine
The French regulator gave both Euronext and Virtu a €5 million penalty for something they did in 2009. They both intend to fight it. But what exactly has been the problem? My French is mediocre, but Alexander Laumonier dived into the issue. See his good read “The tourist of Euronext“.
are there any more details regarding Source Capital? Why did they shut down?
So, the government could tax you for… 1400% in option combinations. Butterflies would be even worse.
Itay G., as a talented business developer, managed to get 100 million USD from a well known fund of funds without any prior track record in asset management. However, he had to over promise expected performance to get to that number. The problem is that even if Source Capital did well compared to other hedge funds, it did not deliver what it promised and the investor pulled out. Being left with no assets under management Source decided to close, despite of some traders having quite decent strategies with Sharpes well above the average in the industry. It is likely that Source will start trading again once new investors are found, perhaps under another entity name, they would then try to hire back some of the key traders. Rumors are that the capital will be allocated to Igor Tulchinsky.
Interesting tax strategy: fining those who keep their holdings for a short time. Sounds like a way to drop liquidity in the market. Those who want to keep their holdings for a longer time will still want to trade, but with less liquidity, the price is more likely going to be wrong. On the other hand, unlike the financial transaction tax in France, the UK and other countries, I suppose that foreign traders will be exempted from the tax, so liquidity might still be provided by foreigners.