Australian securities regulators are the latest authorities grappling with market structure issues through a new set of rules governing dark trading and high frequency trading (HFT).
The Australian Securities and Investments Commission (ASIC) released new market integrity rules Monday to deal with dark liquidity and HFT, which will come into force in stages over nine months.
In terms of addressing dark trading, the new rules include enhanced conflict of interest obligations, a ban on the use of “negative commissions” to pay for order flow, as well as measures regarding transparency, fair access, oversight and control requirements for crossing systems.
As for HFT, the rules require market participants to consider additional factors in determining whether a misleading market has been created, including the frequency of orders and the proportion of orders that are cancelled; it also harmonized rules against market manipulation.
“We expect the new rules will quickly lead to changes in the behaviour of market participants, building on the positive changes we have already seen with other recent rule changes and the work of ASIC’s taskforces on dark liquidity and high frequency trading,” said ASIC commissioner, Cathie Armour.
“The final rules follow extensive internal analysis and consultation with industry and will improve the transparency and integrity of crossing systems and strengthen the requirements for market participants to deter market manipulation,” Armour added.