The impact of the French financial transaction tax on HFT activities and market quality
| Autor: | Étienne Harb, Iryna Veryzhenko, Waël Louhichi, Nathalie Oriol |
|---|---|
| Přispěvatelé: | Groupe de Recherche en Droit, Economie et Gestion (GREDEG), Université Nice Sophia Antipolis (... - 2019) (UNS), COMUE Université Côte d'Azur (2015-2019) (COMUE UCA)-COMUE Université Côte d'Azur (2015-2019) (COMUE UCA)-Centre National de la Recherche Scientifique (CNRS)-Université Côte d'Azur (UCA), Labex Réfi, GREDEG, SRM |
| Jazyk: | angličtina |
| Rok vydání: | 2017 |
| Předmět: |
Finance
Economics and Econometrics 050208 finance Financial transaction tax business.industry 05 social sciences Liquidity crisis Market liquidity and volatility Monetary economics Tax on high frequency trading Market liquidity Agent-based modelling [SHS]Humanities and Social Sciences Ask price 0502 economics and business Liberian dollar Economics Revenue 050207 economics High-frequency trading Volatility (finance) business Market regulation |
| Zdroj: | Economic Modelling Economic Modelling, Elsevier, 2017, 67, pp.307-315. ⟨10.1016/j.econmod.2017.01.021⟩ |
| ISSN: | 0264-9993 |
| DOI: | 10.1016/j.econmod.2017.01.021⟩ |
| Popis: | International audience; Based on the first results, the French government estimates that the tax on cancelled orders, considered as tax on High Frequency Trading (HFT), generated no revenue in 2012. Our paper question the effectiveness of a modified cancelled order tax with no exemptions, all orders cancelled or modified within half-second time span are taxed. Our study has important implications for the regulation of HFT; we provide recommendations for regulators in relation to market rules which have yet to be introduced, using an artificial market framework. This paper addresses the question of whether this tax leads to a reduction in HFT activities and, as a result, to deterioration or amelioration of market quality. The evidence we provide should help market regulators to better understand the role played by HFT firms as liquidity suppliers. We show that HFT liquidity is short-lived. With the implementation of tax, decreased HFT activities do not have a statistically significant impact on market volatility and market liquidity measured by bid/ask spreads, but decrease dollar volumes as a liquidity measure. In addition, reduced HFT activities lead to less efficient markets as the deviation from fundamentals increases. |
| Databáze: | OpenAIRE |
| Externí odkaz: |
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