Position Paper on

the introduction of a financial transaction tax

Companies play a key role for the economic development of a country: J obs, income and the prosperity of a nation
depend on the success and strength of the business sector. However, compani es requi re equity to finance growth
and jobs and to achi eve this, they need well-functioning stock markets!
The Vienna Stock Exchange is critical of the introduction of a financial transaction tax (FTT) for stock trading. The FTT
has a negative effect on the efficiency and functioning of stock markets and makes it more difficult for companies to
raise equity capital. The introduction of a financial transaction tax in France (as of 1 August 2012) had, among others,
the following negative effects:
Trading volumes in less liquid equities declined further and remained low.
Volatility in equity trading increased dramatically and insecurity among market participants grew.
Trading has increasingly shifted to contracts for differences that are traded over the counter.
In order to guarantee the functioning of the domestic capital market, and therefore, of equity financing for companies
despite the financi al transaction tax, the tax must have the following features:
Exemption of market makers from the FTT to secure liquidity and avoid volatility
Complete capture and higher taxation of all off-exchange transactions that could also take place on
regulated markets FTT as steering instrument


Exemption of market makers from FTT
Market makers play a key role for the functioning
of especially regional capital markets: They
help to keep volatility low and provide liquidity by
continuously placing buy and sell quotes at all
times.
Especially on small regional stock exchanges,
without market making there would be no
functioning secondary market.
At present, there are 13 market makers on the
Vienna Stock Exchange for stocks in continuous
trading; the share of market making in total equity
trading was on average 14 % last year (cf. share in
agent trading 56 %, share in proprietary trading
30 %).
Market makers on the Vienna Stock Exchange
currently pay 0.01% in transaction fees so that a
financial transaction tax of 0.1% would make
transaction fees ten times higher! We fear that
banks will not be willing to maintain market making
under such conditions.
If all market makers were to give up their market
making functions at once due to a tenfold hike in
trading fees, as things stand today, it would not
be possible for trading participants to maintain
continuous trading in equities!
The current market model of the Vienna Stock
Exchange stipulates that for all 54 stocks in
continuous trading at least one market maker must
place quotes. Therefore, market makers are a
fundamental prerequisite for trading.



Complete capture and higher taxation of all off-
exchange transactions
The Vienna Stock Exchange demands that the
financial transaction tax be used as a steering
instrument; for example, by taxing off-exchange
trades (e.g. dark pools) that could also take
place on regulated markets at a higher rate.
This would help to reduce opaque and unregulated
off-exchange trading which is, after all, a political
goal.
A higher taxation of off-exchange trading would
not have any negative effects on equity
financing and consequently on the real
economy, because off-exchange trading platforms
do not fulfill any macroeconomic function. Public
offerings and capital increases are only possible
on regulated markets, while off-exchange
platforms offer only stock trading.
Essential for the success of an FTT both
economically and also from a fiscal standpoint is
the compl ete taxation of all off-exchange
transactions without exception.
Investment firms and banks are under the
obligation (MiFID I, 2007) to report their exchange
and off-exchange transactions in securities listed
on regulated markets of the EU to the local market
authorities (transaction reporting). Market
authorities regularly exchange data for the
purpose of the EU-wide recording of transactions.
In Austria, the reporting obligation is regulated in
the Securities Supervision Act ( 64).
The Vienna Stock Exchange proposes
recording over-the-counter transactions based
on transaction reporting .


Company details
Wiener Brse AG
Wallnerstrae 8, 1014 Wien
www.wienerborse.at, info@wienerborse.at
Contact Public Affairs
J udith Kast
T +43 1 53165 184
judith.kast@wienerborse.at
Contact Media Relations
J ulia Resch
T +43 1 53165 186
julia.resch@wienerborse.at