The left-wing French Senate has approved plans for a tax on automated transactions, in order to put a brake on what it sees as excessive growth in high frequency trading.
The plans call for a tax, to be imposed from 1 January 2012, on certain traders who exceed a daily 50 percent cancellation rate on orders. The ban’s architect, federal budget rapporteur Nicole Bricq, believes that curbs on automated trading need to be a priority. According to Bricq, high frequency trading derails markets, lacks transparency and contributes little to France’s ‘real economy’. “We are in a deep and lasting financial crisis,” said Bricq. “This subject has been on the table for 10 years, it is a major political decision.”
In a statement, the Senate finance committee cited high frequency trading as contributing to the 6 May 2010 flash crash and the turmoil that gripped markets during August this year. The committee also stated that automated trading posed considerable threats in terms of operational risk, order instability and market abuse and manipulation.
The proposals will now be considered by the French National Assembly before any implementation is approved.