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Nearly four years after Zero Hedge first suggested an HFT tax should punish algos that "churned" quotes and blasted empty bids and offers to stimulate "momentum ignition" strategies, and generally corrupt market structure in a way that lead to both the flash crash, the BATS IPO farce, the FaceBook IPO debacle and the Nasdaq 3 hour crash, the first such tax is now a reality. And while it is not, and likely never will be implemented in a major (if declining) exchange such as the NYSE or Nasdaq, the first country to finally put an end to millions of parasitic empty quotes is Italy.
From the FT: The conventional fallback excuse is already in play: liquidity will be damaged. Maybe, it remains to be seen. What will remain, however, is a far stronger orderbook, one which doesn't disappear on a dime, and one which doesn't lead to wholesale market shutdowns as the now infamous Nasdaq closure from two weeks ago. Specifically, the tax implementation will look as follows: There are of course those who have paid into the system handsomely enough to be exempt:And with this loophole, the scramble to reclassify all HFT traders as market makers begins.
So while the saying "better late than never" may be applicable, we are confident that when speaking in trivial cliches "too little too late" is far more appropriate.
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