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Securities Transaction Tax and Market Quality – the Case of France

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  • Peter Gomber
  • Martin Haferkorn
  • Kai Zimmermann

Abstract

We study the French Securities Transaction Tax implementation of 1 August 2012. Although a similar tax is planned to be introduced across 11 European countries, consequences for market quality are yet to be thoroughly assessed. We show that liquidity demand and supply significantly drop. Even though the French proposal exempts professional liquidity provision, we find increased spreads and a declined order book depth resulting in additional transaction costs for market participants besides the tax. As all venues trading French stocks are affected, we further find that STT threatens inter†market information transmission by impairing price coordination among fragmented markets in Europe.

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  • Peter Gomber & Martin Haferkorn & Kai Zimmermann, 2016. "Securities Transaction Tax and Market Quality – the Case of France," European Financial Management, European Financial Management Association, vol. 22(2), pages 313-337, March.
    • Handle: RePEc:bla:eufman:v:22:y:2016:i:2:p:313-337
    DOI: 10.1111/eufm.12062
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    Cited by:

    1. Benjamin Clapham & Martin Haferkorn & Kai Zimmermann, 2023. "The Impact of High-Frequency Trading on Modern Securities Markets," Business & Information Systems Engineering: The International Journal of WIRTSCHAFTSINFORMATIK, Springer;Gesellschaft für Informatik e.V. (GI), vol. 65(1), pages 7-24, February.
    2. Zhang, Chris H. & Frijns, Bart, 2019. "Noise trading and informational efficiency," EconStor Preprints 198037, ZBW - Leibniz Information Centre for Economics.
    3. Paulo Pereira Silva, 2023. "Securities transaction taxes and stock price informativeness: evidence for France and Italy," Financial Markets and Portfolio Management, Springer;Swiss Society for Financial Market Research, vol. 37(3), pages 325-345, September.
    4. Jerry Parwada & Yixuan Rui & Jianfeng Shen, 2022. "Financial transaction tax and market quality: Evidence from France†," International Review of Finance, International Review of Finance Ltd., vol. 22(1), pages 90-113, March.
    5. Antoine Bouveret & Martin Haferkorn & Gaetano Marseglia & Onofrio Panzarino, 2022. "Flash crashes on sovereign bond markets – EU evidence," Mercati, infrastrutture, sistemi di pagamento (Markets, Infrastructures, Payment Systems) 20, Bank of Italy, Directorate General for Markets and Payment System.

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