ASIC response: ASIC poised to clamp down on HFT
Response to Australian Financial Review article, 'ASIC poised to clamp down on HFT’ by Patrick Durkin, page 3
7 April 2014
Letters to editor
'Australian Financial Review'
Delivery by email: edletters@afr.com.au
Patrick Durkin's article on high frequency trading may have given the impression market integrity is under threat ('ASIC poised to clamp down on HFT', AFR, April 7).
In reality, existing rules are sufficient to deal with the use of trading technology.
More than 99 per cent of all orders are automated.
To pre-emptively explore whether there are legitimate concerns about HFT in our market, around 18 months ago ASIC took the decision to initiate a task force on this issue. ASIC's study into high frequency trading in the Australian markets found no fundamental deterioration of market quality, or systematic abuse that threatens the integrity of our market. Rather, we found the Australian market, which is less fragmented than the US, to be one of high quality and integrity. The report on our study was published last March.
On the back of the report, ASIC put in place rules to allow for better fairness of access.
Also, ASIC's new market surveillance system is a further safeguard, allowing us to interrogate large data and monitor market activity.
The system is built around algorithmic trading technology, and gives ASIC the ability to analyse trade data for patterns and relationships consistent with the increased use of technology in day-to-day trading.
In addition ASIC has staff dedicated to monitoring trading and we often take pre-emptive action when we are concerned about particular strategies or systems. We recently reported that in the six months to 30 December 2013 there were 18 instances of pre-emptive actions taken by ASIC in regard to execution strategies, algorithmic trading and filter issues.
ASIC is keeping a close eye on changing conditions, patterns and trends – both here and abroad – in what are dynamic financial markets.
Cathie Armour, Commissioner, Australian Securities and Investments Commission
An edited version of this letter was published by the Australian Financial Review on 9 April 2014.