Guidance about the final market integrity rules will be released in the following two months, and the implementation of the rules will be staggered over the next nine months.
After creating a task force last year, the Australian Securities and Investments Commission (ASIC) released a report and consultation paper addressing the subject in March 2013.
Speaking before the Stockbrokers Association conference last month, ASIC chairman Greg Medcraft said the regulator would not be going ahead with its proposal for a “small order resting time” in relation to high-frequency trading.
“On the whole, we found that some of the public perceptions about high-frequency trading appear to have been overstated and were not supported by our findings,” Mr Medcraft said at the time.
In addition, the regulator announced yesterday it would not implement the proposal to replace “materiality” with the “impact” of any order when considering manipulative trading.
When it comes to dark liquidity, ASIC will not proceed with its proposed minimum size thresholds and “tick size” reform.
Instead, ASIC will monitor the impact of the new “meaningful price” improvement rule, which commenced on 26 May 2013 and has subsequently resulted in a decline in the volume of liquidity.
The regulator will proceed with the crossing system transparency and disclosure rules, but market participants will not be required to publish aggregate statistics.
The crossing system fair treatment rules will go ahead, but without a fee constraint on client opt-out. ASIC will not proceed with the enhanced crossing system monitoring and record keeping rules.
“[We will] proceed with rules requiring that all crossing systems comply with core existing requirements for automated order processing, and proceed with requiring notification to ASIC and impacted clients of system outages,” ASIC said.
The T+3 course of sales reports will proceed as proposed, according to the regulator.
In relation to the enhanced conflict of interest obligation, ASIC will go ahead with rules that protect client information, but noted that the regulator “will not proceed with requiring client orders to receive time priority over principal orders and instead amend the existing rule on fairness and priority in dealing so it applies to crossing systems”.
The regulator will limit its rules on “payment for order flow” to negative commissions, and will issue guidance about managing client information when it comes to “indications of interest”.
ASIC Commissioner Cathie Armour said the revised rules would allow for flexibility to “maintain a competitive market regulatory model”.
“Dark liquidity and high-frequency trading are now an integral part of our financial market landscape, and ASIC has confidence that the regulatory settings will ensure an appropriate and measured outcome,” said Ms Armour.
