ASIC today published its ninth report on the supervision and surveillance of Australian financial markets and market participants. The report highlights ASIC’s direct engagement with market participants to address concerns about market conduct.
During the relevant period, there were 19,375 Trade surveillance alerts alerts compared to 17,091 alerts in the previous period.
For example, using the improved functionality of ASIC’s new market surveillance system, Market Analysis and Intelligence (MAI), a persistent pinging strategy was identified in an ASX20 security trading in ASX Centre Point and Chi-X hidden public dark venues. Following intervention by ASIC, that behaviour has now ceased. Pinging is the practice of using the placement of very small orders to test if there is liquidity.
Using MAI, surveillance analysts also identified a recurrence of hacking of retail online share trading accounts. ASIC has worked closely with the firms involved to implement strategies to disrupt this activity.
Further, between July and December 2014, discussions with market participants led to the amendment of order execution methods and the review of trading algorithms on 26 occasions.
The report also highlighted the impact of the improved functionality of ASIC’s new market surveillance system, MAI. The system has allowed ASIC to conduct very sophisticated analysis in very short periods of time.
ASIC is concerned about the high proportion of general advice compared to personal advice, particularly by full-service brokers. They intend to focus more efforts on reviewing the provision of advice by market participants, whether it is being categorised correctly as personal or general advice, and whether the relevant obligations are complied with appropriately. This may include a focus on management oversight and adviser training.
ASIC’s compliance reviews have identified deficiencies with the provision of personal advice and the requirement to provide a clear, concise and effective Statement of Advice. For example, we identified market participants that had not provided sufficient information to clients regarding the basis on which the advice was given—suggesting that inadequate consideration may have been given to clients’ circumstances, goals and objectives.
Other future areas of focus for ASIC, include the Market Entity Compliance System, which will enhance the way market participants and operators interact with ASIC. Other aspects of market conduct that ASIC will be paying close attention to in the coming six-month period include a thematic review of crossing systems which will assess how crossing system operators are meeting their regulatory obligations, targeted compliance reviews of client money obligations, and further analysis into the handling of confidential information.
They are also currently reviewing analysts’ re-ratings for the last four years and comparing them to the timing of publicly-available information. This review may identify potential leakages of confidential information that we will need to further investigate.
