Wall Street & Technology is part of the Informa Tech Division of Informa PLC

This site is operated by a business or businesses owned by Informa PLC and all copyright resides with them. Informa PLC's registered office is 5 Howick Place, London SW1P 1WG. Registered in England and Wales. Number 8860726.


11:30 AM
Justin Grant
Justin Grant
Connect Directly

Proposed Taxes on High-Frequency Trading Won't Become Law

High-frequency trading has become quite the punching bag for overseas governing bodies in recent months, but for the time being it appears that those who rely on it may escape being taxed for it.

High-frequency trading has become quite the punching bag for overseas governing bodies in recent months, but for the time being it appears that those who rely on it may escape being taxed for it.

Last week the Madrid-based International Organisation of Securities Regulators said in a report that "many HFT strategies, coupled with high speed, high volume trading algorithms, could cause market prices to move away from fundamental values in the short term and impair the price discovery process that takes place on public and transparent markets."

The idea that high-frequency trading obscures the markets and causes extreme volatility led the European Commission to consider levying a 0.1 percent tax on the sale or transfer of a range of financial products. Derivatives trades, which are often used by institutional investors as a hedge against swings in commodity and FX prices, would be tagged with a 0.01 percent charge.

In addition to slowing down executions, the tax could also raise $78 billion a year according to the EU's projections. But as it stands now that tax is unlikely to become law in Europe since it requires unanimous approval from all 27 members of the EU.

Germany and France are leading the charge across the continent for the so-called Tobin tax, but media reports say that in addition to the U.K., the Czech Republic is also against it.

Meanwhile finance ministers from the world's 20 largest economies will be debating the concept of a global financial transactions tax in the coming months. But with the United States, Canada, and the U.K. standing in the way, the idea is unlikely to gain much traction.

Even at the domestic level, the industry should be safe for the foreseeable future. Although U.S. Sen. Charles Schumer (D-N.Y.) floated the idea of a tax on high-frequency trading earlier this year, gridlock in Washington means that any legislation, let alone a tax that would be punitive for much of the nation's finance sector has little chance of ever being signed into law.

As the Senior Editor of Advanced Trading, Justin Grant plays a key role in steering the magazine's coverage of the latest issues affecting the buy-side trading community. Since joining Advanced Trading in 2010, Grant's news analysis has touched on everything from the latest ... View Full Bio
More Commentary
A Wild Ride Comes to an End
Covering the financial services technology space for the past 15 years has been a thrilling ride with many ups as downs.
The End of an Era: Farewell to an Icon
After more than two decades of writing for Wall Street & Technology, I am leaving the media brand. It's time to reflect on our mutual history and the road ahead.
Beyond Bitcoin: Why Counterparty Has Won Support From Overstock's Chairman
The combined excitement over the currency and the Blockchain has kept the market capitalization above $4 billion for more than a year. This has attracted both imitators and innovators.
Asset Managers Set Sights on Defragmenting Back-Office Data
Defragmenting back-office data and technology will be a top focus for asset managers in 2015.
4 Mobile Security Predictions for 2015
As we look ahead, mobility is the perfect breeding ground for attacks in 2015.
Register for Wall Street & Technology Newsletters
Stressed Out by Compliance, Reputational Damage & Fines?
Stressed Out by Compliance, Reputational Damage & Fines?
Financial services executives are living in a "regulatory pressure cooker." Here's how executives are preparing for the new compliance requirements.