From Mr Blair Baker.

Sir, Martin Wolf nicely summarised some of the arguments commonly espoused to justify the application of the Tobin tax ("Misplaced hopes in Tobin's tax", March 20) and arrived at an agreeable conclusion.

Let us, however, rethink the feasibility issue.

First, there is little evidence that central banks would consent to "becoming tax collectors"; nor should they. Ernst Welteke, the Bundesbank president, has concluded "a tax on currency trades would jeopardise (currency trading's important role) and undermine market stability". Similarly, Jean-Claude Trichet, governor of the Bank of France, who may reign supreme over the euro in 16 months, has indicated that "the central banks - and I'm not speaking for myself; all my colleagues without any exceptions as far as I know - consider the disadvantages outweigh the advantages".

Moreover, has anyone seen Alan Greenspan, the Fed chairman, queue up behind US senators Paul Wellstone and Peter DeFazio to support their legislation on "US Congress concurrent resolution on taxing cross-border currency transactions to deter excessive speculation"?

Second, would it really be possible to enforce this levy "if all significant jurisdictions did not concur"? The inability to obtain universal application of such an initiative may not force financial institutions offshore. Banks, however, would invariably attempt to find loopholes to circumvent the higher transaction costs. This could lead to less transparency in an already murky market - exactly the opposite of what proponents intend. Is this the type of behaviour that an already smarting industry needs in the wake of the Allied Irish and Rijecka bank scandals?

Third, even if taxing authorities are able to reconcile the differences among major global payment systems and integrate same, the lack of an absolutely universal application could endanger the aggregate global payments system and promote systemic risk. It has taken the Organisation for Economic Co-operation and Development years partially to get offshore financial centres to elevate their standards of accountability. The imposition of an unpopular tax may take several more years to become a reality in less regulated jurisdictions.

Otmar Issing, the European Central Bank's chief economist, has likened the Tobin tax to the Loch Ness monster "popping up once more". Creating navigable markets and financing development programmes are worthwhile causes; the Tobin tax is not the right creature to achieve them. This initiative, like the loch's famed inhabitant, will surface once again. Buy Nessie calls instead.

Blair Baker, Director of FX Research, GCI Financial Ltd