The Australian Securities and Investments Commission (ASIC) has written to market participants to ask they act appropriately to ensure a resilient stockmarket.
In a letter dated 14 May, the regulator said markets had suffered significant volatility in recent weeks which placed a strain on the market. As a result, a limit had been placed on the number of trades that could be executed in a single day by nine large participants.
This limit had now been removed as enhancements had been made to trade processing and there had been a stabilisation in overall trading activity.
However, ASIC now said it expected all participants, not just the largest ones, to ensure the number of trades matched from their orders were capable of being handled. This could mean adjustments to algorithms, intraday monitoring of trades and minimising any excessive usage of very small orders.
The action was supported by the Australian Securities Exchange (ASX), which said it was the “appropriate time” for these measures, and by the Australian Financial Markets Association.
“Now is the appropriate time to lift the trade execution limits given the reduction in extreme market volatility. ASX will continue to work closely with ASIC and the industry in the interests of the Australian market overall,” the ASX said.
A statement from AFMA said: “AFMA acknowledges the steps taken recently by market participants, ASX and Chi-X to ensure that the equity market remains resilient during periods of exceptionally high-volume trading. The Australian equity market is highly regarded, both as a source of capital for Australian companies and as a venue for investors to trade listed shares. This supports the national economy”.
