High Frequency Trading Review


    Jean-Edouard Colliard
    European Central Bank (ECB) – Directorate General Research

    Peter Hoffmann
    European Central Bank (ECB) – Directorate General Research

    February 12, 2013

    This paper presents evidence on the causal impact of financial transaction taxes in a fully electronic market. Our difference-in-differences approach examines the trading activity in French stocks around the introduction of an FTT together with a local HFT tax on August 1st, 2012, relative to a control group of comparable Dutch stocks traded under identical rules. We show that the policy change has led to a large (around 30%) temporary decrease in trading volume during August, which surprisingly was not associated with a significant deterioration of market quality, with the exception of market depth. Most of the impact on volume is reversed in September. In contrast to this largely transitory effect, we uncover a more permanent impact on low-latency activity, as indicated by less aggressive orders and fewer rapid cancellations. Our results suggest that not all types of market activity seem to contribute equally to market quality.

    Colliard, Jean-Edouard and Hoffmann, Peter, Sand in the Chips: Evidence on Taxing Transactions in an Electronic Market (February 12, 2013). Available at SSRN: http://ssrn.com/abstract=2215788 or http://dx.doi.org/10.2139/ssrn.2215788

    Visit resource

    Related content

    News: José Manuel Durão Barroso President Of The European Commission – Speech By President Barroso: “Mission Growth: Ensuring Europe’s Future Through Growth And Stability” Mission Growth Conference Brussels, 29 May 2012
    30 May 2012 – News Articles
    Dear Minister Ole Sohn, representing the current Danish Presidency of the Council, Dear Vice-President Tajani, my dear Antonio, Dear single guests, Ladies and gentlemen, Dear …

    News: Olli Rehn Vice-President Of The European Commission And Member Of The Commission Responsible For Economic And Monetary Affairs And The Euro Europe’s Action Plan For Growth, Employment And Investment European Parliament Strasbourg, 22 May 2012
    22 May 2012 – News Articles
    President Schulz, Honourable Members of the European Parliament, Ladies and Gentlemen, We once again find ourselves at a turning point in the debt crisis. At the same time, th…

    Leave A Reply