It's totally different than ES or ESTX. Those were "new" instruments at the time that needed to prove themselves. If you put a 0.01% tax on bund, no liquidity provider can be profitable and long term traders would pay the tax + the increased spreads and tremendously lose in the end. If say Switzerland lists bund, the liquidiity would just take one year to be transfered there( with all firms setting up delay...). It would just be like a long rollover with a 50-70% volume decrease in Germany the day the tax is applied.
But those were 'first mover' contracts - the initial demand for them was uncertain and not proven. Replicating an existing liquid contract is a lot less risky when you have a major cost advantage - the demand for the contract is already there, the contract is identical in every respect except cost and location. So you are not comparing like with like. Do you remember where the Bund used to trade? It wasn't on Eurex, it was on the LIFFE floor. The volume went totally to Eurex within a few years, and they had a much smaller cost and execution advantage than 0.1% per side. The main question is whether the extra transaction tax cost is sufficiently expensive to make it worthwhile to switch to another exchange with an identical or very similar futures contract. My initial assumption is that it would be relatively straightforward for the competing exchange to offer cost incentives for a few institutions to offer market-making to provide initial liquidity on the new exchange. This should make the new futures listing relatively competitive on liquidity. 0.1% tax is 10+ ticks, the big banks or hedge funds will jump at the chance to provide liquidity for a chunk of that fat edge. Voila, you have a major incentive to provide enough liquidity. If you have the choice of buying bunds for a 1 tick spread + 10 ticks in transactions tax, or buying bunds for a 2-3 tick spread, it's a no brainer which one you are going to choose. We can't be sure until we see what happens, but in today's globalized markets, I would be surprised if it took 5 years to exploit such a huge cost-saving.
If two exchanges offer a contract with identical specs, then the two contracts will arb any difference between the two. The new exchange will not have the problem of wide spreads normall yassociated with a new contract product. If one exchange charges 2 Euro round turn and the other charges 20 Euro round turn, then all the volume will move to the exchange with the lower transaction costs. The only exception to this rule is if the cheaper exchange is unreliable in a technical or financial sense and poses some other form of risk. Runningbear
But how would that prove he is totally wrong? The TT may not have been introduced, the TT may have been introduced with major market-maker exemptions thus turning it into a paper tiger, Eurex themselves may set up a listing and sub-exchange in a foreign jurisdiction to avoid the tax etc. There are many scenarios where Eurex can still be around and doing ok. However, the scenario where a 0.1% TT gets imposed without exemptions, a competing exchange offers a TT-free identical version of Eurex's major contracts, and Eurex itself does not setup an ex-German listing to allow people to avoid the tax, will likely be disastrous for their volumes. You haven't yet given any reason why you think this isn't the case - perhaps you could enlighten us?
It's quite possible and even likely that there will be no transactions tax. No one, especially not myself, ever claimed otherwise. For example, I merely asked you how you can be CERTAIN that politicians won't do something stupid like a TT, and pointed out that dumb TTs have been introduced before. You can be confident that it won't happen, but you cannot be 100% certain - it is plain common sense that if TTs have been introduced before, they can be introduced again. Since your major contention is a straw man, and introduction of the TT is something that NO ONE on this thread said was an absolute certainty, all your posts here are completely besides the point. You completely misunderstood and misrepresented what I and others were claiming. You attacked a position that no one defended or even proposed. You were gratuitously rude to people who said nothing bad to you whatsoever, and merely put forward questions or reasonable statements and conjectures. In other words, you were an insulting and obnoxious moron. And that is why you have been totally humiliated and exposed as a pathetic blowhard with an anger-management problem, much to the amusement of myself and no doubt many others who will now see your inane rantings on this thread. Thanks for the entertainment Now I have work to do, and because I know it will rile you no end, I will now put you on ignore. Ahahahaha.
Given the development of events you are probably right. It looks like the lobbyists have carried across the idea that financial transactions are international by nature and business moves wherever the sun shines. Now the German government keeps pushing for EU-wide transaction tax: http://uk.reuters.com/article/2011/02/04/germany-transaction-tax-idUKLDE7130N920110204 http://imarketnews.com/node/26005 Edit: It looks like I replied to a post that has been subsequently removed by the moderators.
Thanks for your response. Having been involved in this for too long than I care to remember it just made absolutely no sense that such a crazy scheme would ever get the green light. As some idiot before said that it happened once and could happen again,which is like saying that Germany was once under a dictatorship and could happen again,it could in theory but it never will.I think if this guy carries on like that he might become a ghost sooner than he thinks.
Your analogy is idotic, do you hear the current german politicians actually mentioning anything about having a dicatorship in germany or in europe at the moment. But they are talking about a transaction tax, it may all be political postuering but it is being seriously discussed.
YOU are idiotic,remember saying this crap? DB are about to buy NYSE not the other way round as you ignorantly thought. Eurex move out of Germany - stay off the drugs son before you sit at the PC. Basically you don't know shit about this - I guess thats what happens when you enter into a debate with a novice. I'd have some respect for your views if you had the brain to realise how wrong you got it - everyone gets it wrong sometimes,even me. That analogy was aimed at the moron who thinks that just because something has happened in the past it can happen again.