Italy First Of Many To Tax High Frequency Traders

Italy introduced a levy on high-frequency and equity derivative trades on Monday, the second stage of a process started earlier this year to tax financial transactions in the country.

The tax – which will apply regardless of where the transaction is executed – follows an introductory scheme launched in March in the country which taxed both exchange-based and over-the-counter share trading.

The new levy will subject high-frequency trading (HFT) to a 0.02 percent tax on trades occurring every 0.5 seconds or faster. HFT hasn’t been without its fair share of controversy in recent years. Blamed for high volatility in markets it uses software to post trades in microseconds. It is believed to be the reason behind a number of glitches on global stock markets over recent months.

Italy is not alone in the move to tax transactions, with France initiating its own in August 2012. Both moves are part of a grander European Commission project. The EU wants to ensure that the financial sector makes a fair and substantial contribution to public finances and to discourage financial transactions which do not contribute to the efficiency of financial markets.The idea has gained traction with 11 EU countries, also including Germany,Greece, and Spain, planning to introduce a pan-European financial transaction tax in January 2014 which will affect most equity, debt and derivative transactions.

CNBC

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.