Copying and distributing are prohibited without permission of the publisher
Italy introduces HFT tax
02 September 2013
Italian government implements 2bp charge on trades of 0.5 seconds or faster
Italy has become the first Eurozone nation to introduce a transaction tax on high frequency trading (HFT). The tax applies from September 2.
Trades occurring 500ms (0.5 of a second) or faster and equity derivative trades will incur a 2bp levy.
The tax will apply to shares issued by Italian companies with a market cap greater than €500m, Depositary Receipts and shares via convertible bonds, regardless of where they are executed, according to AMN Ambro Clearing.
Christian Voigt, business solutions architect at Fidessa, told Global Investor that he was “very concerned” about the introduction of the tax.
“I don't believe that the FTT per se is beneficial for the market. There's a great risk of reducing liquidity and market efficiency,” he said.
Voigt also noted that the Italian tax was “rather complicated” in its wording and implementation, which had led the Italian government to postpone its introduction from late June.
The introduction of the HFT tax follows the implementation in March of a 22bp tax on exchange-based trades and a 12bp levy on over-the-counter trades, although a number of activities and trading entities are exempt from the tax, including national and European central banks, pension funds, market makers and intra-group transactions.
As of January 2014, 11 Eurozone countries have agreed to implement a continent-wide transaction tax, which was recently backed by the European Parliament, although unsolved organisational and operational issues remain.
Voigt said that should the Europe-wide tax be imposed the “negative effects will be multiplied,” but added that it was unlikely to be in place by the January deadline, with the European Commission itself suggesting a mid-2014 implementation date as a more realistic option.
Voigt highlighted the differences yet to be reconciled between members: “There is still a number of questions about the Europe-wide FTT. For example, if you compare the Italian and French approaches – there's number of significant differences and since they're part of the 11, there still an agreement needed to consolidate them. One of them will have to change their approach to implementation.”
The International Securities Lending Association has estimated that the proposed tax would would render securities lending “quite substantially uneconomic”, threatening up to two thirds of the 63% of the European securities lending market.