In a wide ranging speech, Greg Medcraft, Chairman, Australian Securities and Investments Commission outlined the role of ASIC, and some of the issues they are focussing on, including “how we influence conduct, our new review of high-frequency trading and dark liquidity, managing confidential information and our new Market Entity Compliance System”. Of specific interest, the findings from the latest review on dark pool trading is due end October 2015.
High-frequency trading and dark liquidity
The next topic I wanted to talk about is our upcoming review of high-frequency trading and dark liquidity. As part of ASIC’s ongoing monitoring of our markets, we are reviewing high-frequency trading and dark liquidity following on from our earlier review in 2013.
While we don’t have any specific concerns about high-frequency trading at present, and are satisfied that the regulatory framework is appropriate, we recognise that this is a dynamic area. In 2012, high-frequency traders were less than 1% of traders but 27% of turnover in the ASX 200. We are launching a new review to assess how high-frequency trading has changed in both the futures and equities markets.
On dark liquidity, our review will consider how dark liquidity – currently 28% of market turnover – and dark trading venues are evolving. It will also re-test whether the balance of lit and dark liquidity is impacting price formation, which is fundamental to trust and confidence in our markets.
Key findings from our reviews will be published towards the end of October 2015, and we will consider if there are any areas where we need to respond by applying the right nudge to change behaviour.
