<p>New York - A study by the Capital Markets Cooperative Research Centre (CMCRC) found that one of the world's first implemented messaging taxes has harmed market quality as it led to a decline in quote submission, trades, volume and deteriorated liquidity.</p><p>The study, by Alexander Sacco and Andrew Lepone, looked at Canada's recently implemented Integrated Fee Model.</p><p>The study used raw measures of message traffic, trades and order-to-trade ratio to examine the association between message traffic, trading and liquidity. It employed regression analysis to examine the relation between order-to-trade ratio and market quality using a sample of the top 60 stocks by market cap for Chi-X Canada over a period from the beginning of 2011 running into 2012.</p><p>"Messaging tax-style regimes have been talked about in various jurisdictions both to quell HFT and to appropriate funds to use for more regulation," said Professor Mike Aitken, chief executive of the CMCRC. "The problem is that these proposals haven't been tested or modeled before being implemented, leaving whole markets open to the law of unintended consequences."</p><p><a href="http://www.automatedtrader.net/headlines/142308/australian-study-shows-messaging-tax-hurts-liquidity">Keep reading...</a></p>