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New rules to monitor dark pool transparency

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By Reporter
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2 minute read

Dark pools and high frequency trading will be subject to new market rules, as the government looks to improve transparency.

The minister assisting for financial services and superannuation, David Bradbury, has announced a series of market integrity rules, which he said will help to improve transparency in the sector.

“The rules respond to issues identified by the Australian Securities and Investments Commission's (ASIC) dark pools and high frequency trading taskforces," Mr Bradbury stated.

"These rules provide improved investor protection in dark pools by requiring dark pool operators to improve transparency of their market's operation and by restricting preferential treatment for some investors. The rules also improve market integrity by harmonising market manipulation rules across licensed markets."

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The new rules include the public disclosure of information so that markets users can understand how their orders may be handled and executed and find details on the operation of dark pools disclosed to clients.

Furthermore, dark pools will be operated by a common set of procedures, and dark pool operators will be responsible for notifying users and ASIC about system issues as soon as possible.

The rules will be implemented in stages over a nine-month period, with ASIC issuing guidance to clarify their application.

Mr Bradbury said the new rules will increase investor confidence in Australia’s financial markets.

“These rules build upon those approved in November 2012 to improve investor protection and market stability," said Mr Bradbury.

"We are already seeing benefits from those rules. For example, the meaningful price improvement rule approved last year has resulted in a 40 per cent drop in below block size trading in dark pools in its first month of operation.”

He described that as “a great success” but added additional rules remain an option if the meaningful price improvement rule proves insufficient over the longer term.

Mr Bradbury also said the government would consider whether dark pools "should become licensed financial markets as part of Treasury's ongoing Australian market licence review.”

New rules to monitor dark pool transparency

Dark pools and high frequency trading will be subject to new market rules, as the government looks to improve transparency.

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