Financial firms that specialize in risky high-speed trading are boosting their lobbying efforts against proposals to rein in the practice, a Wall Street Journal analysis of lobbying records found. Three Democratic lawmakers introduced legislation that would institute a small tax, known as a financial transactions tax, on high-frequency trades, which reap major profits for firms but add volatility to financial markets.
In response, high-speed trading firms have more than doubled their lobbying efforts, the Journal found:
That follows a steep increase in registered lobbying by high-speed trading firms. Such spending averaged $2.3 million in 2011 and 2012, more than double the average from 2008 to 2010, according to an analysis by The Wall Street Journal of data compiled by OpenSecrets.org, part of the Center for Responsive Politics.
Eleven European countries recently adopted a financial transactions tax; the United Kingdom already has a limited version of the tax that Labour Party lawmakers have looked into expanding. Sens. Tom Harkin (D-IA) and Sheldon Whitehouse (D-RI) and Rep. Peter DeFazio (D-OR) in February reintroduced their plan to levy a 0.03 percent tax, which they say will raise $352 billion over the next decade, on high-speed trades. Such taxes aim to curb the explosion in high-frequency trading that has only grown since the financial crisis, as this chart from market analyst Nanex shows:
The financial industry argues that such a tax would limit growth potential, but as DeFazio told ThinkProgress last year, the U.S. had a financial transactions tax after World War II when it experienced its greatest period of economic growth. Many business leaders support the tax, including high-speed trading’s pioneer, who said last year that the growth in that trading “has absolutely no social value.”