Our CEO Duncan Niederauer has a blog entry(!), Beware of the Taxman, posted on Insitutional Investor’s site. It’s a quick read, but for the time challenged, here are some key excerpts:

According to the Investment Company Institute, if a … transaction tax had been in place last year, the 90 million Americans who own shares in mutual funds would have seen their returns reduced by $48 billion. . . .

The cost of capital will increase in part because of a widening of spreads between bid and ask prices. Spreads have tightened substantially in recent years, making U.S. markets the most liquid and efficient in the world. Today the average spread on high-volume New York Stock Exchange stocks is less than 10 basis points. The proposed transaction tax is more than 2.5 times this amount and would increase the average spread across all NYSE-listed issues by 50 percent. . . .

Furthermore, a transaction tax would encourage a move by investors to more-opaque trading venues — just as regulators are encouraging the opposite. The tax would also create a powerful incentive for companies to raise capital and list shares overseas, damaging U.S. economic leadership. . . .

But in reality such a globally coordinated tax is nearly impossible to imagine. Even if the U.S. and the EU were to agree, it is highly doubtful that every country would follow, creating opportunities for regulatory arbitrage. . . .

Last, lawmakers are deceiving themselves in thinking that a transaction tax is an effective way of raising revenue. History indicates that transaction volumes will fall more than supporters of the tax understand, bringing in a lot less money than Congress expects.

Again, I think it’s worth reading the original, which is only 800 words, for the full argument. Welcome your thoughts on the idea of a financial transactions tax.