Exchanges ring alarm bells over EU transaction tax

Top exchange officials opposed to a European financial transactions tax intensified their lobbying on Tuesday, warning it would push trading to other parts of the world and make it harder for companies to raise funds.

Eleven countries from the European Union are examining a plan to tax their stock, bond and derivatives trades from January 2014, no matter where they happen in the world.

The aim is to raise up to 35 billion euros a year to make banks pay for the help received in the financial crisis.

The United States opposes the levy, fearing New York will be hit, while Britain, worried about its impact on London, the EU's biggest trading center, has challenged the plan at the European Court of Justice.

Another EU member, Luxembourg, wants the tax reined back.

Mark Hemsley, chief executive of London-based BATS Chi-X Europe, one of the region's pan-European stock exchanges, said much financial regulation was politicized.

"The number one example of that is the financial transaction tax which in the end will be extremely harmful for Europe, especially if it stretches into extra-territoriality and becomes the next trade war, as it were," Hemsley told a CityWeek conference on Tuesday.

"The extra-territorial ramifications are absolutely alarming," added Janet Ecker, president of the Toronto Financial Services Alliance, which promotes the Canadian city as a financial center.

Brazil's bad experience with transaction taxes should be noted, said Eduardo Refinetti Guardia, chief financial officer of the Brazilian BM&F Bovespa exchange.

"The impact on the capital markets was very negative. We started to see companies listing in the U.S. At the end of the day what really happens is that you export your markets," Guardia said.

Tomoyoshi Uranishi, a senior executive at the Tokyo Stock Exchange, said the tax would be very dangerous for Europe's market and "a very bad influence over the world economy".

"If the FTT is introduced extensively, I think most of the trading weight will shift from Europe to Asia and America," Uranishi said.

Hemsley said the tax was being rushed without working out how it will operate or be collected, with the cost ultimately passed on to retail investors and pension funds.

A tax on trading in Italy and France has dented volumes and this would be replicated across the 11 countries, said Finbarr Hutcheson, chief executive, commercial and business development at NYSE Liffe, one of Europe's top exchanges.

"We are a long way from the final proposal. This tax will be implemented but it will be changed considerably from the first draft," Hutcheson said.

"My mother in law thinks it's a great idea. I can see a strong body of opinion outside this industry that wants some sort of tax."

(Editing by David Cowell)