ASIC says dark pool rules are working

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This was published 9 years ago

ASIC says dark pool rules are working

By Georgia Wilkins

The corporate regulator says new rules designed to tackle dark pools are working.

Alongside high-frequency trading, dark pools – markets that trade privately without disclosing real-time price information – have been in the spotlight following the release of Michael Lewis' new book, Flash Boys.

The Australian Securities and Investment Commission said on Monday the rule changes, introduced last year, had succeeded in reducing the amount of smaller trades made through dark pools, and prevented dark pool traders from getting an advantage over other traders.

ASIC Commissioner Cathie Armour said no further change to the rules were necessary but that it would ''continue to monitor market developments''.

''We are satisfied the current policy settings and rule framework has had the desired effect of improving fairness and addressing the concerning trend of increasing below block size trading and declining block size trading,'' Ms Amour said.

ASIC has downplayed concerns that dark pools and high frequency trading is a big problem in Australia.

Following the release of Flash Boys, which describes how high-frequency traders have the ability to beat slower traders to deals, it said the problem was not as serious in Australia as in the US.

''While many local media outlets have been quick to try and draw parallels with the Australian market, any suggestion that high-frequency trading is pervasive in Australia, is simply not supported by the evidence,'' it said.

An ASIC report into high-frequency trading and dark pools in March last year identified a number of concerning trends relating to the effect of dark pools on market quality and liquidity.

It said on Monday that some of these concerns had been addressed by the new rules, which include a meaningful price improvement rule and a lower block tier threshold.

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''Participants can now trade smaller blocks away from lit markets where they would have traditionally faced higher market impact costs,'' it said.

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