The Australian Stock Exchange (ASX) has repealed the 10-second rule for crossing Australian stocks, thereby removing a key barrier to continuous crossing services.
The ASX said that it would amend its rules on crossings using pre-existing bid or offer and on priority crossings to remove the 10-second period previously required when executing on-market crossings. The change will be effective from 30 November 2009.
Currently, a crossing effected by matching a bid or offer with a pre-existing bid or offer on a trading platform is only permitted if the second bid or offer is “entered or amended at least 10 seconds” after the first. Similarly, a priority crossing can only be effected on a trading platform at the crossing price after a delay of 10 seconds,
This means that matches on a alternative trading platform between a buyer and seller of a particular stock have to be posted on the ASX’s public order book for 10 seconds, with the cross being broken if the price in that stock moves within the time period. This has made it difficult for crossing networks such as Liquidnet or ITG’s POSIT to offer continuous crossing services in Australian stocks.
The ASX said an eight-week notice period would be needed “to allow for any development work that may be required to effect this change”.
The exchange first proposed the removal of the 10-second delay from its priority crossing rule in November 2008, following a consultation with market participants on the efficiency of trade execution on the ASX.
Last week, the ASX announced a review of algorithmic trading on its futures and cash equities platforms, which it expects to publish in March 2010.
Overall responsibility for regulation of Australia’s financial markets is to be transferred from the ASX to the Australian Securities & Investments Commission by the third quarter of 2010. The change in supervision is expected to result in a wider range of alternative trading systems operating in Australia.