Public concerns about high frequency trading (HFT) appear to have been over-stated and are probably attributable to increased use of trading technology generally, according to an Australian Securities and Investments Commission (ASIC) report on the impact of dark liquidity and HFT.
However ASIC said the work by two internal taskforces had found potential breaches of Market Integrity Rules and the Corporations Act, and these matters were being investigated.
The report and a consultation paper released today revealed that two internal ASIC taskforces had not found any systematic manipulation or abuse of markets by high frequency traders, but found that their trading strategies were commonly adopted by many other algorithmic traders, including institutions.
Commenting on the findings, ASIC deputy chairman Belinda Gibson said many of the issues raised could be dealt with by existing regulations and that there had been a marked change in the professional traders' behaviour during the course of the regulator's study.
That study found that HFT in Australia was dominated by a small group of trading entities, with the 20 largest entities accounting for about 80 per cent of all HFT turnover representing 22 per cent of total equity market turnover.
On the question of dark liquidity, the taskforce found that while the volume of dark trading was remaining around 25 to 30 per cent, the composition of dark liquidity and market participant-operated dark venues had changed significantly.
It said there were now 20 crossing systems operated by 16 market participants and they had started to connect to one another.
