HFT and dark liquidity less problematic
The Australian Securities and Investments Commission (ASIC) is no longer quite so worried about high frequency trading and dark liquidity.
The regulator has issued a new report in which it claims that financial market users have become better able to operate in the new high speed electronic environment.
Commenting on the report, ASIC Commissioner, Cathie Armour said ASIC had concluded that current levels of high-frequency trading and dark liquidity were not adversely affecting the function of Australian markets for businesses and investors.
"Financial markets play a critical role in the Australian economy. It is vital that they are fair, orderly, transparent and efficient, and that investors can have trust and confidence in their operation," she said.
According to the report, ASIC's updated analysis had shown that market users had become better informed and equipped to operate in an electronic and high-speed environment, and negative sentiment about high-frequency trading had therefore reduced.
It said the level of high-frequency trading in Australia's equity markets had remained steady (at 27 per cent of total turnover) and that high-frequency trading had grown by 130 per cent in the futures market since December 2013 to 21 per cent of volume traded in the SPI and 14 per cent of bond futures.
"These levels are not currently concerning, however, ASIC will continue to monitor their development," the ASIC report said.
On the question of dark liquidity, the report said it had remained reasonably constant in recent years at around 25—30 per cent of total equity market turnover.
"Feedback from stakeholders also indicated that there was now less concern with dark liquidity in our markets," it said. "Concerns ASIC previously held about the transparency and fairness of market participant-operated crossing systems have mostly abated."
The report said that ASIC remained concerned about exchange market and crossing system operators seeking to preference some users over others, and the methods used by some market participants to manage their conflicts of interest for principal trading and client facilitation.
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