An Australian Securities and Investment Commission (ASIC) review of rule changes affecting ‘dark trading' and their impact on market quality reveals current policy has had the desired effect of improving fairness.
The review, released yesterday, examines the market impact of the meaningful price improvement rule and changes to block tier thresholds which ASIC introduced in May last year.
ASIC implemented the two independent rile changes to address concerns about the impact of dark liquidity on the efficiency and integrity of the markets relating widening bid-offer spreads, queue jumping and liquidity.
The review indicates the trends in dark liquidity that were of some concern have discontinued. These include issues regarding below block size dark orders stepping ahead of lit orders which have now been addressed and the bid—offer spread is more equitably distributed between parties executing below block size dark trades.
Furthermore, since the rules were implemented participants can now trade smaller blocks away from lit markets where they would have traditionally faced higher market impact costs, said ASIC.
‘We are satisfied the current policy settings and rule framework has had the desired effect of improving fairness and addressing the concerning trend of increasing below block size trading and declining block size trading," ASIC commissioner Cathie Amour said.
ASIC said the review has supported the changes made last year and do not propose to change current rules on dark liquidity but will continue to monitor market developments.
