Hazel Henderson writes: Today, over 60% of all trading on Wall Street exchanges is done by computers - all programmed to compete to get the fastest execution of their trades at the best price. Each trade generates a commission so the most trades make the most money. The latest "innovation" is "high-frequency" or "flash" trading, where the computer programs run so fast that they can trade stocks, bonds or commodities thousands of times per minute. These computers are so fast that they can "see" other orders in line before they are actually traded. This allows bonanza profits from the proprietary trading of Wall Street banks and hedge funds such as D E Shaw, advised by Larry Summers, now US President Obama's chief economic advisor. We support stronger reforms than those in the US Congress ("More Advice for Summiteers on Reforming the Global Casino").
Curbing excessive trading in our global financial casinos has now become essential. Below 1% taxes on all financial transactions can slow down and reduce the staggering volumes of trading today. Economist James Tobin promoted this idea in the late 1970s. Many experts assessed this tax, found it beneficial and reviewed various ways of collecting it (The Tobin Tax: Coping with Financial Volatility, Oxford Univ. Press, 1996). Obama's economist Larry Summers recommended such a tax in his ”When Financial Markets Work Too Well: A Cautious Case for a Financial Transactions Tax" (1989). The FTT can be collected using the computer program FXTRS and is supported by the European Parliament and many in the US Congress and at the G-20.
In 2009, Lord Adair Turner, head of Britain's Financial Services Authority, asserted that financial sectors had become overgrown and questioned their social utility, calling for a financial transactions tax on all trades. Such proposals, including my own (The United Nations: Policy and Financing Alternatives, Elsevier UK, 1995), were howled down by financial sector players, the World Bank and IMF. Let's bring trading back down to Earth. FTT can help stabilize financial markets and to reap many public benefits, including billions in funding to ameliorate the damages inflicted by rogue finance.
Hazel Henderson, president of Ethical Markets Media (USA and Brazil) www.ethicalmarkets.com, developed the Green Transition Scoreboard™. She is the author of The Politics of the Solar Age (1981), Ethical Markets: Growing the Green Economy (2006) and the Calvert-Henderson Quality of Life Indicators, updated regularly at www.calvert-henderson.com.
This article is part of our NSFM opinion series, in which participants propose specific steps towards real and sustainable market reform. NSFM participants are invited to contribute to the series. Please contact Ebba Schmidt or Frank Jan de Graaf for further information.