The Italian government has decided this week to blaze a trail in the regulation of high frequency trading by approving a tax aimed at curbing the super fast computers which all too often lead to a variety of mishaps. The first-of-its-kind tax of .02% will be applied to any order cancelled within 1/2 second of being placed. The move comes amid broader European support for stymieing HFT, but the industry has done a solid job thus far lobbying to prevent regulations from being passed. It’s worth noting that the Italian tax has an exemption for market makers, and therefore couldn’t be applied directly to the U.S. The vast majority of HFT firms, like Knight Capital for example, have the distinction from exchanges as being a designated market maker.
Though no country in the world has yet to tax high-frequency trading specifically, several regulations have deterred the practice, particularly in Asia. In Hong Kong for instance, a 0.1 percent stamp duty on purchases and sales of stocks, makes the bourse too expensive for some high-frequency trading firms. In South Korea, a 0.3 levy on the sale of listed stocks will continue to deter high-frequency firms, say traders.
Further Reading on High Frequency Trading
- HFT Shenanigans: Spoofing eMinis; AAPL, PG, And Nasdaq’s Weak Excuse
- HFT Shenanigans: Inside The Nasdaq Darkness
- Problems Continue For Everbright Securities As Its Shares Trade Limit-Down
- HFT Primer: Co-Location