Market Infrastructure Regulation and the Financial Transaction Tax

Abstract

Based on the sensitivity of the European Financial Markets highlighted by the last financial crisis, the European Union is pushing for reforms of the existing regulatory framework and has also proposed a Financial Transaction Tax. Until now, the European Union has already adopted a Regulation on short selling and certain aspects of credit default swaps and a European Market Infrastructure Regulation aiming at over‐the‐counter derivatives markets. It currently debates reforming the Markets in Financial Instruments Directive and adopting a Markets in Financial Instruments Regulation and a Regulation on Central Securities Depositories. This strand of financial market regulation shall be complemented by a Financial Transaction Tax pushed forward through the enhanced cooperation mechanism. This article analyses the interplay between the financial market regulation, including the European Union’s reform proposals, and the proposed Financial Transaction Tax. The authors will conclude that both strands of financial market regulation are not sufficiently coordinated.