1. Your leaders are reading
September 1, 2013 4:35 pm
Italy introduces tax on high-
speed trade and equity
derivatives
By Philip Stafford
Italy will on Monday become the first country to introduce a tax on high-frequency trading in a
move that has become a test case for potential further crackdowns on the controversial practice.
The country will introduce levies against high-speed trading and equity derivatives in the final
part of a two-stage process established this year to tax equity-related transactions.
However banks and brokers – many of whom were scrambling on Friday for clarification of key
details – have warned the new taxes could further damage liquidity in the Italian market.
Volumes have fallen sharply since the introduction of a tax on equities in March.
Policymakers in Europe are considering levies on financial transactions as a way to stabilise
markets, curb so-called speculative and high-speed trading and plug gaps in government budget
deficits. A European Commission proposal has the backing of 11 eurozone countries while
France mandated a watered-down tax similar to UK stamp duty a year ago. Similar proposals
have also been floated by lawmakers in the US and Australia.
The Italian version explicitly focuses on high-frequency trading and derivatives, which are often
used by corporations and banks to hedge against risk. The tax will also apply regardless of
where the transaction is executed, or the country of residence of the counterparty.
For high-frequency traders, order changes and cancellations will be taxed at 0.02 per cent when
they occur within a timeframe shorter than half a second, once above a threshold.
There will be fixed charges for equity derivatives, depending on the type of contract, and deals
executed off-exchange will subject to a higher tax band. Intermediaries such as market makers
are exempt from the tax.
The European Commission’s transactions tax has been delayed amid fierce criticism from many
areas of the market over its implementation, point of collection and ambition.
www.ft.com/tradingroom

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