Hollande Transaction Tax Drives Investor Quest for Loopholes

Source: Bloomberg News

French President Francois Hollande’s transaction tax is set to take effect Aug. 1. Not all investors will be paying it.

To escape the tax, many institutional investors will turn to so-called contracts for difference, or CFDs, offered by prime brokers that let them bet on a stock’s gain or loss without owning the shares. Traders have used it successfully to skirt the U.K.’s stamp duty.

“We’ve never purchased U.K. stocks without using a CFD,” said Fabrice Seiman, co-chief executive officer of Lutetia Capital, a merger-arbitrage fund in Paris that oversees $100 million. “Now we’ll do the same for French stocks. It is individual investors who are going to pay.”

France will become the first European country to impose a transaction tax on share purchases, including high-frequency trading and credit default swaps. The levy, aimed at curbing market speculation, will be paid on transactions involving 109 French stocks with market values of more than 1 billion euros ($1.2 billion), including Pernod Ricard SA and Vivendi SA. (VIV)

Read more: http://www.bloomberg.com/news/2012-07-23/hollande-transaction-tax-drives-investors-quest-for-loopholes.html