ASIC has announced six new rules regarding dark pools and high-frequency trading to further protect investors and the stability of Australia’s financial markets.
The new rules are designed to protect against market manipulation in “dark pool” trading venues by introducing toughened rules for investment banks and will include six specific rules on “dark liquidity”, where share trades happen off market, and two new rules on high-frequency trading. Investment banks will have to disclose information about their use of dark pools and report any suspicious activity.
David Bradbury, The Minister Assisting for Financial Services and Superannuation has commented that, “the Government is acting to ensure that investors have continued confidence in Australia’s financial markets. These new rules address investor concerns while also ensuring the benefits continue, such as investor choice and competition to lit markets from dark pools, and liquidity benefits from high frequency trading.” The other significant new rule is that market participants may no longer receive negative commissions, which have been used to steer traders away from one trading system towards another.
ASIC Commissioner Cathie Armour said the regulator had followed “extensive internal analysis with industry” and the rules “will improve the transparency and integrity of crossing systems”. They also would “strengthen the requirement for market participants to deter market manipulation”.
These rules will come into force in stages over a nine-month period with ASIC to issue guidance to clarify the new rules and expectations of market operators and participants.