Italy Mulls Fee to Rein in Ultra-fast Share Trade

As reported by Reuters, Italy will introduce a special fee to rein in high-frequency share trading as soon as next month, two sources close to the market regulator said on Thursday, making it the latest European country to seek to curb volatility in their stock markets.

“The Italian bourse is mulling an overhaul of its fee structure to include a special fee that will hit those who submit and immediately cancel a high amount of orders,”, one of the sources said, referring to an activity typically related to high-frequency trading (HFT).

Computer-driven high-frequency trading has been blamed by critics for making markets more volatile, although others say the practice boosts liquidity.

HFT strategies attempt to profit from ever-smaller price movements in stocks. The orders they generate are therefore more likely to be cancelled or amended quickly as the prices of other stocks or instruments change.

Earlier this year, France said it would introduce a 0.01 percent tax on high-frequency trading in August, though details remain vague.

Italy’s market regulator Consob has called for the Milan stock exchange, a subsidiary of London Stock Exchange, to impose a fee when cancelled orders are 100 times more a completed order, following the European Securities Markets Authority’s (ESMA) issue of guidelines on supervising high-frequency trading.

In ESMA’s paper, issued late last year, the pan-European markets regulator gave national regulators and financial market participants until May to comply with the new guidelines.

Consob and Borsa Italiana declined to comment.

According to market players, HFT accounts for about 20-25 percent of trade by value on the Italian stock exchange, a percentage rising to 40 percent when intra-day volatility spikes.

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