The Australian markets regulator has amended proposed rules on dark liquidity and high-frequency trading (HFT), after industry consultation and a drop in dark trading volumes caused by price improvement rules.
The Australian Securities and Investments Commission (ASIC) will shelve minimum size thresholds and tick size reform as it scales back planned rules on dark trading and HFT tabled last year.
In a statement, the regulator said it would instead monitor the impact of price improvement rules implemented in May, which have caused a 30% drop in Australian dark pool volumes.
New rules on crossing system transparency and disclosure will go through, but fees will be disclosed to clients, not the public, as originally outlined.
“ASIC’s taskforces on high-frequency trading and dark liquidity, and earlier work over the past two years, has seen an improvement in the awareness of these areas of trading, hence the move not to proceed with some rules at this time,” ASIC commissioner Cathie Armour said.
Small order resting time rules designed to better manage HFT activity were also dropped due to fewer “small and fleeting orders”, the regulator said. Instead, ASIC will continue to monitor such activity.
Armour said ASIC was confident the amended rules would maintain the integrity and fairness of the Australian market.
“The rules allow for flexibility to maintain a competitive market regulatory model, one that can move with the increasingly dynamic nature of our markets,” Armour said.
The results of ‘Consultation Paper 202 Dark liquidity and high-frequency trading: Proposals’, which opened for industry submissions in March, will also limit the regulator’s rules on payment for order flow to negative commissions.
“Dark liquidity and high-frequency trading are now an integral part of our financial market landscape, and ASIC has confidence that the regulatory settings will ensure an appropriate and measured outcome,” Armour said.
The final market integrity rules will be published in July and August, from which time a nine-month implementation period will begin.