Sell-side trade body the Association for Financial Markets in Europe (AFME) has released a protocol to help manage broker-to-broker payments of the French transaction tax.
A number of brokers and proprietary trading firms have signed up to an indemnity letter that allows them to manage the tax they pay when trading with each other.
Under the French FTT – which came into force on 1 August and levies a daily 0.2% charge on net buys of Paris-listed stocks that have a market cap of €1 billion or more – responsibility for collecting the tax lies with the party that receives a purchase order from the final buyer of a stock.
But brokers that buy and sell French stocks need to manage payments based on their positions at the end of each trading day to avoid duplicate payments.
The same problem does not affect long-only buy-side firms that typically invest over a broader horizon and do not buy and sell stocks intraday.
Earlier this month, AFME also translated guidance supplied by the French authorities to assist its members in preparing for the tax.
While the tax came into force at the start of this month, its collection – managed via a declaration system operated by central securities depository Euroclear France – will be delayed until November to help with compliance. American depository receipts will also be subject to the tax from December.
Request for clarity
Meanwhile, the extraterritorial applicability of a draft German law that seeks to impose tougher controls of high-frequency trading firms has also been called into question.
Under current proposals presented by the German Ministry of Finance on 30 July, HFT firms would need to be licenced under the German Banking Act, requiring them to have a minimum amount of capital, while trading venues would be required to charge for excessive message traffic.
But how the law might apply to non-German entities engaged in trading the country’s stocks remains a source of confusion.
“Under the draft wording, non-German market participants might be subject to the obligation to provide information requested by the German regulator,” said Martin Krause, partner at Norton Rose. “The industry requests a clarification of the wording on whether non-German market participants are not affected."