MPs propose tax to eliminate profit on high frequency trading of shares

THE GOVERNMENT should investigate introducing a financial transactions tax pegged at the average profit on a high frequency trade, according to a report released today by MPs.

In addition, asset managers should be forced to spend a set part of their commission on long term investment research, according to the business, innovation and skills select committee.

While the MPs admit there are concerns about the practicality of implementing a transaction tax, they say it could stop what they consider to be “poor practices”, such as algorithm-driven trading.

Their recommendations are made in a progress update on the government’s Kay Review, first published twelve months ago. The original review was commissioned by business secretary Vince Cable and was tasked with finding ways of making the equity markets target long-term performance over short-term profits.

“It is not enough for the government to simply say it supports Kay’s recommendations and then leave it to the industry to change of its own volition,” said committee chair Adrian Bailey MP. “The government must set measurable, accountable targets through which reform can be driven and measured.”