As reported yesterday, at 9:30 am this morning the permanent subcommittee on investigations will hold a hearing in which it will expose the latest tax-evasion loophole used by select high-frequency trading hedge funds which has the technical name "basket options", but which, thanks to Carl Levin's mnemonic of fictional derivatives" will be better known as such (read the full story How RenTec Made More Than $34 Billion In Profits Since 1998: "Fictional Derivatives")
It will be interesting to learn, although we doubt it will be discussed, how in light of collapsing trading volumes for underlying securities, how much of the record derivative and future trading volume in recent years is directly related to this kind of tax-evading trading, and perhaps just as important, whether Congress and the IRS will crack down on such practices in the future.
Watch it live below (link to the Senate website here):
The agenda of today's hearing:
The Subcommittee hearing will examine a set of transactions that utilize financial engineering and structured financial products to attempt to avoid paying U.S. taxes on short-term capital gains. Witnesses will include representatives of major financial institutions, as well as tax experts from a nonprofit institution and the U.S. Government Accountability Office.
PANEL ONE
STEVEN M. ROSENTHAL
Senior Fellow
Urban-Brookings Tax Policy Center
Washington, DC
JAMES R. WHITE
Director, Tax Issues
U.S. Government Accountability Office
Washington, DC
PANEL TWO
MARTIN MALLOY
Managing Director
Barclays
London, United Kingdom
SATISH RAMAKRISHNA
Managing Director, Deutsche Bank Securities Inc.
Global Head of Risk and Pricing for Global Prime Finance
New York, NY
MARK SILBER
Executive Vice President, Chief Financial Officer, Chief Compliance Officer, and Chief Legal Officer
Renaissance Technologies LLC
New York, NY
JONATHAN MAYERS
Counsel
Renaissance Technologies LLC
New York, NY
PANEL THREE
GERARD LaROCCA
Chief Administrative Officer, Americas, Barclays
Chief Executive Officer, Barclays Capital Inc.
New York, NY
M. BARRY BAUSANO
President and Managing Director, Deutsche Bank Securities Inc.
Co-Head of Global Prime Finance
New York, NY
PETER BROWN
Co-Chief Executive Officer and Co-President
Renaissance Technologies LLC
East Setauket, NY
Download the report, "Abuse of Structured Financial Products: Misusing Basket Options to Avoid Taxes and Leverage Limits" [PDF]
