Sydney: The Australian Securities and Investments Commission (ASIC) is proposing new rules to regulate automated stock trading that will require traders to have stringent controls on their platforms.
Electronic trading platforms have come under scrutiny this month after a trading error at Knight Capital Group Inc. drove the market maker to the verge of bankruptcy.
“Recent events overseas are a reminder of the speed and automation of markets and the importance of robust controls over those systems,” Belinda Gibson, deputy chairman of ASIC, said in a statement. “The enhancements to participant-level controls that ASIC has released for consultation, together with the market-level controls released in June, will build confidence in the integrity and cleanliness of our capital markets and facilitate international capital flows.”
Traditional exchanges worldwide are losing market share to alternative operators. Trades on dark pools, where the size of orders and identity of the parties is hidden, are reported to exchanges after they have taken place. ASX Ltd. lost its monopoly as Australia’s only public bourse in October last year with the entry of Nomura Holdings Inc.’s Chi-X Australia Pty.
Block trades and dark pools accounted for an average 25 per cent of Australian share transactions this year and as much as 43 per cent on one day in June, ASX, operator of the country’s largest bourse, said on August 6.
Keeping pace
“Automated trading is the evolution of broking and trading practices using computer technology,” the Australian Financial Markets Association, an industry group representing leading brokers, banks, and fund managers, said in a statement. “In order for Australia’s markets to maintain relevance and compatibility with international markets, it is essential that the local markets keep pace with the latest developments. It is important that risks that accompany it are managed prudently.”
