It’s election day! Whilst the institutional sector takes a pragmatic view, the retail spread betters take political odds
Two completely opposing ideologies form the choice for Britain’s electorate today. One despises the financial sector, the other has been instrumental in growing it into what it is today – a world-renowned, high quality and technologically advanced powerhouse
Today, rather earlier than expected, the British electorate will take to the polls in order to decide the leadership of the country which plays host to the world’s largest and most diversified financial center – London.
Incumbent Prime Minister Theresa May called for a snap General Election following her hand-over period from the previous Prime Minister David Cameron whose forgettable legacy has now been consigned to the same history books as Britain’s European Union membership.
It could well be that Ms May’s reason for calling a General Election was based on complacency in that she was so certain that a 1970s trade unionist relic who abhors Western democracy and enterprise yet reveres South American dictators such as Hugo Chavez would be so un-electable that her inevitable win would secure a Conservative government for the next four years, or it could be that she clearly realizes that she does not have the leadership skills to drive an independent Britain forward.
Either way, a very worrying bright red surprise has made its presence felt this week, that being a very rapid surge in the popularity of the hard socialist Labour party, which now appears to be at level odds of winning the election compared to the popularity of the Conservatives.
London’s Square Mile is the bete noire of the Labour Party. Shadow Chancellor John McDonnell, himself also a former trade unionist who backs renationalizing banks and imposing wealth taxes is particularly interested in damaging London’s wealth-generating prowess and world class financial center. He actually lists “generally fomenting the overthrow of capitalism” as one of his interests in the Who’s Who directory of influential people. He also advocates the complete public ownership of all banks.
Mr McDonnell has served as Chair of the Socialist Campaign Group in Parliament and the Labour Representation Committee, and was the chair of the Public Services Not Private Profit Group. He is also Parliamentary Convenor of the Trade Union Co-ordinating Group of eight left-wing trade unions representing over half a million workers.
Mr McDonnell wrote in 2012 that a financial transaction tax would halt “the frenetic, madcap speculation in the City” and raise money for infrastructure investment.
“If the City resists then let’s make it clear that capital controls would follow,” he said in a piece for Labour Briefing, a left-wing website.
He has also said he wants to take the power to set interest rates away from the Bank of England and to give it back to government. This would reverse a decision by the Blair government to let the central bank decide monetary policy.
The Tobin Tax is on the agenda of the Labour Party too.
Just three years ago, there was a substantial amount of discourse mounting in London with regard to the European Union’s predilection for the intrinsically socialist Tobin Tax on transactions that are placed in trading financial instruments.
That has now gone completely quiet, as Britain opposed it on principle and has managed to fend it off, however in 2013, eleven European Union member states, all of which were led by left-wing governments, announced their wish to move ahead with introducing a financial transactions tax.
At that time, the nations – which include France and Germany – intended to use the tax to help raise funds to tackle the debt crisis, and the tax had the backing of the European Commission which was reinforced after the 2014 election the highly unpopular Jean-Claude Juncker as President.
The other countries that wished to introduce it were Italy, Spain, Austria, Belgium, Greece, Portugal, Slovakia, Slovenia and Estonia, all nations with absolutely no place in the world’s highly advanced financial markets economy. Greece’s government accountants, when not asleep for half of the day, cannot tell the top from the bottom of their balance sheets, Italy is rife with corruption, Portugal is agrarian, Belgium has invoked outright bans of retail electronic trading instruments and Slovakia, Slovenia and Estonia have absolutely no Tier 1 bank presence.
Jeremy Corbyn’s policies echo this line of thinking.
The Tobin tax was originally proposed to target the FX market when it was orchestrated by James Tobin in the 1970s, and whilst Britain has managed to remain free from it’s burden until now, Jeremy Corbyn is a staunch advocate of implementing it.
During one particular conversation, the Labor Party’s support for the implementation of the Tobin Tax on all trading transactions was raised, as was, rather alarmingly, the potential of a Britain free of dominance of the financial sector.
This is an outright policy aimed at destroying the advanced and globally respected financial sector and the technology and infrastructure that supports it on an international and institutional scale, in the absurd and vain attempt to damage the country’s economy beyond repair just to drum home an anti-capitalist ideology which would be ruinous.
Hong Kong, Singapore, Sydney and New York would then await the arrival of the world-leading senior professionals of London whilst tumbleweed blows across London’s parklands.
As far as industry opinion is concerned, Britain’s most important leaders of the largest domestic market companies are firmly in the sensible camp.
One example is Peter Hargreaves, co-founder of Britain’s largest financial services company Hargreaves Lansdown which provides CFDs, stocks and indices to a completely British client base, and has its proprietary Vantage system.
Hargeaves Lansdown’s self-developed Vantage service, in-house operation, offers customers a wide selection of option choices such as spread betting and CFDs, ISA’s, SIPPs as well as corporate and government bonds, ETF’s, Investment Trusts. The company considers its strong customer service and safety of client funds to be top priorities.
Yorkshire-born computer salesman Mr Hargreaves and Bristolian accountant and football enthusiast Stephen Lansdown established the company in 1981 as a small general insurance brokerage, however today the firm is a FinTech and electronic trading leader, with assets under management totaling £54.7 billion from 760,000 domestic market clients.
Mr. Hargreaves was one of the most prominent and vocal supporters of the British exit from the European Union, and donated £3.2 million to the campaign for an independent Britain alongside CMC Markets founder and CEO Peter Cruddas, himself a former Conservative Party Treasurer, who donated £1 million.
This month, Mr Hargreaves spoke about the means by which firms in Britain can maintain global talent. “People who are doing great jobs in this country are feeling insecure and I think it would be really good for those people to have the comfort that we are not going to boot them out in 18 months’ time.”
“I just think we should make the gesture, full stop. I don’t think there should be a quid pro quo, I just think we should make the gesture. They would look pretty churlish if they didn’t reciprocate by guaranteeing the status of UK nationals in the EU” he said.
He also urged Theresa May not to simply wait for Brussels to guarantee the rights of Britons living across the continent.
As far as the actual trading contingent is concerned rather than the corporate effect, there are several implications to consider.
The British Pound rallies when a Conservative majority is predicted, and falls when a socialist majority is predicted.
Just over a month ago, at the time during which Prime Minister May called the election, IG Group Market Analyst Chris Beauchamp said “The sterling move can be attributed to two things — firstly the fact that the market expects the Conservatives to win by a comfortable margin thus providing continuity of government and also greater freedom for Theresa May in her Brexit negotiations (since she will no longer be hostage to the most vehement anti-EU Tory MPs).”
“Second, the market remains net short sterling to a remarkable degree. When some of these shorts are forced to cover, the upward move accelerates, forcing more to close their positions, and so on” he continued.
Aside from the economic and commercial factors, which would be absolutely polarized by the party that wins the election, the spread betting companies in Britain are having a busy time with political odds.
Sporting Index has been offering spread bets on overall majority prediction and what they term the “Most Seats 100 Index” for spread betters to guess how many seats will be gained by each party.
This is simply a binary bet, however retail trading giant IG Group has been reducing its odds on the Conservative win. At the outset, IG Group predicted a 90 seat win by Conservative, whereas yesterday morning it was down to 40. Still a win, but a shrinking one.
Today, the sensible majority must triumph over the disruptive in order to ensure the future of the great and proud electronic trading center of London, right through from the Tier 1 bank single dealer platforms and institutional ECNs, to the liquidity providers and retail FX giants.