30 July 2013 Exchange Rate Perspectives: FX and the Financial Transaction Tax The FIT would apply to all financial institutions. Financial institutions are defined as investment firms, trading platforms or exchanges, insurance companies, pension funds, alternative investment funds, special purpose entities (SPEs) and special purpose vehicles (SPVs) and any other entity for which the average annual value of financial transactions constitute more than fifty percent of overall net turnover.' There are limited exceptions. Non-financial entities are not required to pay, but financial institutions transacting with non-financial entities are. Moreover, non- financial entities would be held jointly and severally liable if a financial institution fails to pay. Transactions with Central Counter Parties (CCPs), Central Security Depositories (CSDs) and International Central Securities Depositories (ICSDs), national debt management offices, member state central banks, the ECB and other international organizations do not fall under the FTT. The Fr would also not be charged on primary market transactions, or underwriting. The proposal envisages a broad territorial reach of the FTT. It would apply to all financial entities established in participating states. It would also apply to all financial entities transacting with a counterpany based in the participating states. Transactions involving securities issued within a participating member state will also be caught, irrespective of where the counterparties to the deal are based. This 'issuance principle' is designed to strengthen anti-relocation provisions of the FR by making less desirable for entities established in participating states to move trading activities abroad. The issuance principle would apply to instruments like bonds and stocks. It is uncertain as to whether it would apply to the euro currency. Euros are issued by the ECB. an EU-established entity. It is not clear whether euro- denominated deri