Australian Securities and Investments Commission Releases Consultation Paper and Report on Dark Liquidity and High-Frequency Trading

The Australian Securities and Investments Commission ("ASIC") released a consultation paper and a report examining the impact of dark liquidity and high-frequency trading on Australia's financial markets. The documents focus on the quality of the market for capital raising and long-term investment.

The dark liquidity task-force was set up in response to concerns about its impact on market efficiency and quality; the high-frequency trading task-force addressed concerns about disorderliness and unfairness. While the task-force did not find systematic manipulation or abuse of markets by high-frequency traders, it found that their trading strategies are commonly adopted by many other algorithmic traders, including the institutions. According to ASIC, dark trading is now occurring in smaller sizes that are similar to "lit" exchange markets and, for some securities, this has influenced their prices. ASIC concluded that further regulation was necessary.

See: Consultation Paper and Report (links externally to ASIC website).See also: Proposed amendments to ASIC market integrity rules: Dark liquidity and high-frequency trading.For a compilation of recent related news items, link to Current Topics - Algos and Electronic Trading.