It seems that trading volumes in France, Italy and Hungary—the early adopters of Europe’s controversial financial transaction tax—are down because of the controversial levy, as market participants are warning that the FTT laws and the wider 11-nation proposals to come will continue to see transactions migrate away from affected markets and into different instruments.

The U.K., although vehemently against the current FTT proposals, has had its own share levy in place for years in the form of a stamp duty reserve tax of 0.5% on share transfers. And many instruments, such as contracts for difference (CFDs), have been developed in this time to allow investors to circumvent the U.K. stamp duty.

And the new FTT that is set to be enforced from January 2014 in 11 of the 27 European Union member states—including Germany, France, Italy and Spain—is expected to see a 0.1% tax imposed on all buyers and sellers of share and bond transactions issued in the participating areas and a 0.01% levy on derivatives trades. Many on the buy side are warning that liquidity will simply move away from these affected markets once the tax is in operation.

“Transactions do tend to move in a way to minimize transactions,” said Giovanni Govi, chief investment officer at Theorema Asset Management, a London-based European long/short equity group.

“It is quite clear that the introduction of FTT in general has seen equity market participants manage to move liquidity away from markets that were introducing these details.

“And if you look historically at the U.K. stamp duty, you have seen the ability to create CFDs in the U.K. and I expect a similar pattern to occur in the FTT countries.”

Recent figures released by consultancy TMF Group reveal that Hungary, which implemented a 0.1% tax at the start of this year, saw its levy bring in less than half the revenue it expected. France, too, with its 0.2% tax on sales of shares of major firms, saw revenues of just €200m from a three-month period from the levy’s introduction in August 2012. France expected to see revenues of €530m for the period. While Italy, which introduced its scheme from March 1, has seen trading volumes slump by 38% already, while German and Spanish volumes rose in the same period.

“In the end, the FTT won’t be a major contributor to tax receipts,” said Ricardo Arroja, chief investment officer of Pedro Arroja, a Portuguese-based investment manager. Portugal is one of the 11 EU nations to sign up to the FTT proposals.