The Federal Government has announced a suite of market integrity reforms aimed at better protecting investors who use Australia’s financial markets.


Minister for Financial Services, Bill Shorten, said the packages of reforms will also include “kill switches” over algorithmic trading.


"I am aware that some investors have expressed concern about the use of High Frequency Trading and dark pools. The Government is acting to ensure that investors have continued confidence in Australia's financial markets," Mr Shorten said.


“I believe that these new rules will help to reduce the risk of market volatility from high frequency trading and provide increased investor protection for retail investors and others trading in dark pools.”


Mr Shorten said the rules had been developed following extensive consultation with the Australian Securities and Investments Commission (ASIC).


The new rules provide for:

  • direct control over trading algorithms, including 'kill switches' to immediately stop an algorithm if required;
  • new extreme trading rules in cases of large price movements;
  • a requirement that dark pools offer meaningful price improvement over the lit market, with exemptions for block trades; and
  • additional data reporting requirements to assist ASIC in performing market surveillance.


The market integrity rules will provide for an immediate obligation on the market operators, ASX and Chi X, to enforce an extreme trading range for trades in securities. There will also be new data reporting requirements on operators from 2013. 


Mr Shorten also announced he has requested that the Australian Treasury conduct a full review of Australia’s financial market licensing regime.


The new rules can be found on the ASIC website.