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Donald Marron

The rise of trading quote spam

High-frequency quoting that has skyrocketed recently, leading some in the US to think it might be time for a financial non-transaction tax similar to the one in France. The French will also impose a tax on traders who submit too many unfilled quotes.

By Guest blogger / August 11, 2012

A trader works on the floor of the New York Stock Exchange, in this June 2012 file photo in New York City. High-frequency quoting that has skyrocketed recently, leading some in the US to think it might be time for a financial non-transaction tax, like France implemented.

Mary Altaffer/AP

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On Monday, I posted a lovely animated gif from Nanex showing the rise of high-frequency trading. What I failed to mention is that graph doesn’t show completed trades. It shows quotes.

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Donald B. Marron is director of economic policy initiatives at the Urban Institute. He previously served as a member of the President's Council of Economic Advisers and as acting director of the Congressional Budget Office.

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And according to another nice chart from Nanex, it’s high-frequency quoting that has skyrocketed, not trading.

The number of unexecuted quotes, many allegedly not intended to be executed, has thus skyrocketed.

France recently took steps to try to deter the rise in quotes. In addition to a financial transactions tax it, France will also impose a tax on traders who submit too many unfilled quotes.

In short, France will levy a financial non-transaction tax.

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