After
extensive internal analysis and consultation with industry, the Australian
Securities and Investment Commission adopted market integrity rules on dark liquidity
and high-frequency trading. Commissioner Cathie Armour said that the ASIC
expects the new rules will quickly lead to changes in the behavior of market
participants.
With regard to dark
liquidity, crossing system operators must publish on a website information
about their crossing system and make disclosures to clients on the operation of
the crossing system. They must also identify in trade information for wholesale
clients the crossing system and whether they traded as principal.
In addition, the tick
sizes that apply to exchange markets will also apply to crossing systems. Crossing
system operators must have a common set of procedures which do not unfairly
discriminate between users and allow clients to opt out of using their crossing
system. If suspicious activity is identified in a crossing system, it must be
reported to the ASIC. Further, market participants must protect confidential
client information and deal with client orders fairly and in due turn.
Regarding high frequency
trading, market
participants must consider additional circumstances in considering whether a
false or misleading market has been created. They must also consider the
frequency with which orders are placed, the volume of products that are the
subject of each order, and the extent to which orders made are cancelled or
amended relative to the orders executed.