In its latest market cleanliness report, ASIC characterised a clean market as one that has no share price run-ups before material information is released, minimising the risk of some parties profiting unfairly by using information that is not generally available to the market.
“Clean financial markets are essential for the financial wellbeing of Australians and fundamental to an efficient economy. They enable businesses to raise capital and manage risk and give investors confidence to invest,” ASIC chair Joe Longo said in a statement on Wednesday.
“Protecting and enhancing the integrity of Australia’s equity markets continues to be a priority focus for ASIC.”
In examining the five years to 30 April 2024, the report found two periods of temporary deterioration in market cleanliness; the first during the COVID-19 pandemic when global markets experienced high market volatility and trading, and again in late 2023 as corporate activity increased.
The regulator said interventions to address harmful conduct included targeting “pump and dump” activity, intervening on chat rooms, reviewing finfluencer activity and undertaking targeted reviews, where it observed leaks ahead of market announcements.
“We will continue to invest in data and technology to hunt and detect all forms of market misconduct. As our financial landscape evolves, we will expand our market cleanliness work to capture private markets and products in the coming year,” Longo said.
Key findings from the report indicated that the majority of trading activity prior to material price-sensitive announcements (MPSA) was “relatively” clean.
However, ASIC identified that, on average, 0.56 per cent of accounts and 4.75 per cent of trading volume exhibited anomalous behaviour ahead of MPSAs, suggesting that when anomalous accounts traded, they typically traded in higher volumes than other accounts on these announcements
The telecommunications sector was found to be the cleanest, with 0.43 per cent of accounts trading ahead of MPSA being flagged as anomalous. Conversely, real estate was the least clean sector (0.66 per cent).
To enhance its enforcement capabilities further, ASIC confirmed it is establishing a dedicated criminal investigation team to progress insider trading investigations and increase the number of criminal briefs it refers to the Commonwealth Director of Public Prosecutions (CDPP).
On a Bloomberg panel on Wednesday, Longo revealed that although Australia’s market cleanliness remains high, maintaining momentum is essential.
“I think we need to acknowledge that our approach to dealing with market abuse in Australia is actually very sophisticated and effective. The critical thing, though, is to maintain that confidence, and secondly, not to be complacent about it.”
He also pointed to ongoing challenges with resourcing as the regulator works to uphold market integrity.
“We have a lot of expertise within ASIC, but as I’ve said publicly on a number of occasions, our resources are always stretched,” Longo said.
“At the moment, we have six matters in the courts that are working their way through on insider trading charges, and we have multiple investigations going on on insider trading. So the issue for us is how we bring those matters to a quicker conclusion, get those referrals to the CDPP and get decisions made.”
