Securities Transaction Tax and Market Quality – The Case of France

25 Pages Posted: 2 Mar 2016

See all articles by Peter Gomber

Peter Gomber

Goethe University Frankfurt Faculty of Economics and Business Administration

Martin Haferkorn

Goethe University Frankfurt Faculty of Economics and Business Administration

Kai Zimmermann

Goethe University Frankfurt Faculty of Economics and Business Administration

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Date Written: March 2016

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.

Keywords: financial transaction tax, liquidity, market efficiency, volatility

Suggested Citation

Gomber, Peter and Haferkorn, Martin and Zimmermann, Kai, Securities Transaction Tax and Market Quality – The Case of France (March 2016). European Financial Management, Vol. 22, Issue 2, pp. 313-337, 2016. Available at SSRN: https://ssrn.com/abstract=2740781 or http://dx.doi.org/10.1111/eufm.12062

Peter Gomber (Contact Author)

Goethe University Frankfurt Faculty of Economics and Business Administration ( email )

Grueneburgplatz 1
Frankfurt am Main, 60323
Germany

HOME PAGE: http://www.efinancelab.de/no_cache/team/?user_wiwipubs_pi2[showUid]=478

Martin Haferkorn

Goethe University Frankfurt Faculty of Economics and Business Administration ( email )

Theodor-W.-Adorno-Platz 4
Frankfurt am Main, 60323
Germany

Kai Zimmermann

Goethe University Frankfurt Faculty of Economics and Business Administration ( email )

Grueneburgplatz 1
Frankfurt am Main, 60323
Germany

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