“But does this mean that a financial transactions tax is going to happen? No it doesn’t,” he said.

Clinton’s proposed tax on canceled orders “is designed to address some of the concerns that she’s had and many other observers have had, about markets flooded by high-frequency traders -- about the manipulative behavior profiled in books you’re aware of,” said Gary Gensler, a senior Clinton campaign adviser.

Gensler, who served as chairman of the Commodity Futures Trading Commission from 2009 through 2013, was referring to “Flash Boys,” Michael Lewis’s 2014 best-selling book, which portrayed some of the speediest traders as using computers to rig the market. Some academic research has blamed such traders for submitting high volumes of canceled orders, creating false impressions of demand.

Market Concern

High-frequency traders typically work at obscure firms outside the main cluster of big banks that dominate Wall Street, and they work through automated markets spread out across New Jersey and Chicago. They gained attention after the so-called “Flash Crash” of 2010 wiped $800 billion from the value of U.S. stocks in a few minutes, amid concern that their computer-driven strategies fueled market instability.

Proponents of high-speed trading, which is carried out through sophisticated algorithms, argue that it promotes liquidity in markets. High-frequency trading firms accounted for about half the trading volume in U.S. stocks in 2015, according to the Tabb Group, a market research and consulting firm.

Costs Down

“High-frequency traders provide a lot more liquidity than we used to have, and they’ve driven down trading costs,” said Lawrence Harris, a finance professor at the Marshall School of Business at the University of Southern California. Harris was the chief economist of the Securities and Exchange Commission from 2002 to 2004.

Some large hedge funds use high-frequency-trading algorithms, and some big banks use algorithms of various types -- albeit sparingly under restrictions on their ability to do speculative trades. Harris said it follows that a tax on canceled orders would primarily hit specialized high-frequency trading firms, not Wall Street banks. “It just plays into people’s fears of computers,” he said, adding that he opposes such a tax.

Clinton’s tax on canceled orders remains little more than a talking point for now. Her campaign has yet to provide detail on how it would be applied or collected. Michael Schmidt, a Clinton campaign economist, said the goal is “to level the playing field so that the investing public gets a fair shake and fair access to the market.”