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The three measures, announced by Economic Secretary to the Treasury Ed Balls, will modernise the tax system to remove obstacles to competition and expand choice in trading financial instruments in the UK. Balls says the changes are designed to allow firms to benefit from the new opportunities offered by MiFID. From November 2007, share transactions on a regulated market under MiFID will not have to be reported to that market or intermediaries in order to benefit from stamp duty tax relief.
Currently, relief from stamp duty is available for intermediaries that trade securities listed on the main market of the LSE only if they are members of the LSE and they report their trades to the exchange.
This move will allow new providers of transaction reporting services to enter the market more easily, says HM Treasury in a statement.
Secondly, the government also intends to make shares admitted to trading on a multilateral trading facility (MTF) eligible for stamp duty tax relief. Currently, in order to benefit from stamp duty relief, intermediaries trading in such securities are required to report transactions to the market on which the securities are admitted to trade. The government intends to remove this requirement, in order to further extend choice in transaction reporting.
The government also plans to change the definition of a recognised stock exchange for tax purposes to allow shares traded on other regulated markets under MiFID to benefit from the same tax arrangements that currently apply only to the LSE. Balls says the opening up of financial markets in the EU is a great opportunity for the UK: 'With the measures I am announcing today, the structure of the UK tax regime will reinforce the more open and competitive trading environment that we are creating in Europe.'
The news coincided with an informal meeting of the High Level Group on City competitiveness, during which senior figures from the UK-based financial services sector met European Commissioners Charlie McCreevy and Neelie Kroes to discuss financial services policy in Europe, including developments in trading securities. Traditional exchanges will be facing increased competition from new market operators and investment-bank backed consortia when MiFID becomes law. Earlier this month the LSE started a consultation on the services it plans to offer to help member firms comply with MiFID. Both Euronext and Deutsche Börse have also outlined plans for competing in the post-MiFID market.
In related news, London compliance recruitment agency Joslin Rowe says an extra 1200 temporary workers skilled in compliance will be required in the City of London over the next 10 months due to MiFID alone. Michelle Myers of Joslin Rowe, says there has been a 20% increase in the number of temporary compliance jobs focusing on MiFID orientated projects over the past two months.
'It's becoming a hotbed of compliance recruitment across the temporary market as financial institutions scramble to get the right people on board immediately,' says Myers. She says multiple compliance job offers are becoming commonplace and contract rates are rocketing.
'MiFID specialists are so in demand that we are even seeing savvy permanent employees move to temporary positions in order to take advantage of lucrative contracts - which are typically running at £700/£800 per day,' says Myers. 'It's like the Y2K phenomenon all over again in terms of compliance recruitment requirements and there is no sign of this abating.'