Regulating High Frequency Trading and Dark Liquidity in Australia

Abstract

This chapter focuses on how the Australian Securities and Investment Commission’s general regulatory approach has informed its response to the challenges facing investor trust and confidence as a result of high frequency trading and the growth in dark liquidity. Technological change, increasing competition, and globalization mean that financial markets are changing more rapidly than ever before, posing a number of challenges from a regulatory perspective. This is particularly true for exchange markets: innovation and advances in information technology are delivering lower costs for investors, yet alongside these positive developments is a need for continued testing, monitoring, and accountability. In this context, the chapter discusses ASIC’s responses to both real and perceived problems in the market, as well as the changes stimulated by ASIC’s actions.