| Summary: | 碩士 === 朝陽科技大學 === 財務金融系碩士班 === 96 === This paper extends the work of Chou and Wang (2006) to test the impact of reducing tax on the Taiwan future market quality by using intraday and daily data obtained from TEJ. Our contribution of this study is to divide the investors into speculators and hedgers and to analyze whether the current transaction tax is optimal. We find that, after reducing tax, an increasing in bid-ask spread increases trading volume and decreases open interest. The traded spread and order processing cost decreases but the inventory and adverse select cost increases. Although the volume increases insignificantly, the government tax revenue will increase. Finally, the feedbacks between speculators and hedgers in different tax rate regimes are insignificant, but speculators and hedgers impact traded spread and volatility in the long run. Hence, the second reducing tax leading to an increase in traded spread and volatility mitigates the improvement of the Taiwan futures market quality, with suggesting that the market seems to be a bit unstable.
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