THE Australian Securities and Investments Commission has announced new market integrity rules for high-speed traders and dark pools in a bid to address concerns about changes in the structure of the local equity market.
The announcement came just a day after the federal government gave approval to the regulator to clamp down on ultra-fast traders and to more tightly control off-market trading venues.
The rule changes will be phased in over the next 18 months.
''Developments in trading and market structure domestically and abroad are rapidly shifting the landscape of the Australian market and we see a trend towards more frequent, smaller trades, away from public markets, with implications for the price formation process,'' ASIC chairman Greg Medcraft said.
''The rules, the result of industry consultation dating back to 2010, address issues ASIC considers necessary to maintain fair, orderly and transparent equity markets.''
The rule changes for high-frequency traders include new volatility controls for extreme price movements and an extension of rules to govern ASX SPI 200 index futures contracts in a bid to minimise ''cross-product contagion''.
The new rules for dark pools - where orders are matched by electronic algorithms with no human intervention - include a rule of enhanced data for supervision, including additional data on orders and trades including identification of crossing systems and whether a trade for a wholesale client was done through direct market access. ASIC established two internal taskforces in July to look at dark liquidity and high-frequency trading.
Over the past few years, ultra-fast trading has had a huge impact on global stockmarkets.
On any given day, this lightning-quick, computer-driven form of trading accounts for 30 per cent of all business transacted on Australia's sharemarket.
But critics say the practice has contributed to hair-raising flash crashes and trading hiccups.
On Monday, the chief executive of the Australian Securities Exchange, Elmer Funke Kupper, welcomed the announcement from the federal government, saying the ASX supported the introduction of kill switches, new extreme trading rules and data reporting requirements and would work with ASIC to implement them.