Market Infrastructure Regulation and the Financial Transaction Tax

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 regulating over-the-counter derivatives markets. The Directive on Markets in Financial Instruments was subject to major reforms and Regulations on Markets in Financial Instruments and on Central Securities Depositories were enacted. 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 and the proposed financial transaction tax. The authors will conclude that both ways of regulating financial markets are not sufficiently coordinated.