For Immediate Release
Flash Crash Anniversary Intensifies Call for Tax on Wall Street Trades
High Time for Congress to Follow EU Lead and Curb High-Frequency Trading
WASHINGTON - May 6 marks the fourth anniversary of the Flash Crash of 2010, when the Dow Jones dropped more than 1,000 points, losing 9 percent of its value in a matter of minutes. High-frequency trading is widely blamed for the Flash Crash, as computer algorithms (PDF) intensified the ripple effect on the economy.
High-speed trading by computers has been receiving much attention lately due to Michael Lewis’ book, “Flash Boys: A Wall Street Revolt.” About half of all market activity is still generated by computers run by high-frequency traders. The Department of Justice, the Securities and Exchange Commission and the Commodity Futures Trading Commission are investigating claims that high-frequency trading amounts to illegal front-running, providing an unfair advantage in the market.
The leading long-term solution to high-frequency trading is a modest tax on Wall Street trades, called a financial transaction tax. Proposals have been introduced in Congress to tax trades at anywhere between 0.5 percent and 0.03 percent of the transaction. Even such a small tax would slow down high-frequency traders, who realize only a fraction of a cent per trade but do well because they make billions of trades. Moreover, the Joint Committee on Taxation calculated that a .03 percent tax (only 30 cents per $1,000) would raise $352 billion over 10 years. Proposals for a higher tax rate could generate considerably more.
Financial reform advocates will mark the Flash Crash anniversary by calling on Congress to pass a financial transaction tax and to support the European Union (EU) nations as they move to implement a unified tax on trades. Eleven EU nations are expected to make an announcement on May 6 regarding how they plan to move forward with their proposal for a unified tax on trades.
Susan Harley, deputy director of Public Citizen’s Congress Watch division; Taylor Lincoln, research director for Public Citizen’s Congress Watch division; Marcus Stanley, policy director for Americans for Financial Reform; Nicole Woo, director of domestic policy for the Center for Economic and Policy Research; Sarah Anderson, global economy project director for the Institute for Policy Studies; and Jim Lardner, communications director for Americans for Financial Reform are available to discuss:
- Legislative proposals to tax Wall Street trades;
- The impact of the Flash Crash and high-frequency trading on our economy;
- A recent Public Citizen report (PDF) showing that a financial transaction tax wouldn’t harm average investors;
- Opinion research showing Americans’ support for a tax on Wall Street; and
- European action to tax financial transactions.
Please contact the Public Citizen press office to arrange an interview. For live updates, follow #FlashCrash and #WallStTax on Twitter.
Public Citizen is a national, nonprofit consumer advocacy organization founded in 1971 to represent consumer interests in Congress, the executive branch and the courts.