Italy To Introduce Fees To Deter HFT
By ETF.com Staff | 21 February, 2012

Italy is set to introduce a fee aimed at cutting the level of high-frequency trading on its national bourse imminently, according to various reports.

Borsa Italiana, the stock exchange owned by the London Stock Exchange, is said to be planning to bring in a new tariff system that would charge traders sending in orders above a certain limit.

According to a Reuters report, the move comes at the request of Italian regulator Consob, which wants the exchange to apply a fee when cancelled orders are 100 times more than completed orders.

Giuseppe Vegas, the head of Consob, told the Financial Times that the new charging system aimed  to “slow down” HFT trading to improve stability in the markets. He said in an ideal world, similar regulatory controls would be adopted all over the world.

However, it seems not all regulators are as concerned about the practice of HFT. Sweden’s Finansinspektionen, which opened an investigation into HFT last Autumn, has now concluded that while it could give rise to market abuse, HFT is not a threat to financial stability in the country.

A study commissioned by the UK government last year and carried out by academics also concluded that market efficiency had “not been harmed by computerised trading in regular market conditions”.

High-frequency trading has come under scrutiny from various regulators since it was blamed by many for the “flash-crash” that took place in 2010. Critics have argued that HFT contributes heavily to market volatility.

One poster commenting on the Financial Times report said: “A lot of HFT is simply bombarding a trading system with enough messages to slow it down so algos can jump in and out while everyone else is waiting for more updated information. On the internet that's called a denial of service attack. On a stock exchange, it's called ‘the free market’.”

Curbing high-frequency trading was one of the motivations behind last year’s European Commission proposal for an EC-wide financial transactions tax, but this now looks increasingly unlikely to come to fruition on a Europe-wide basis, although France is pushing ahead with plans to introduce a national tax.

 

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