Review of broker licensing rules initiated

Andrew White, and Andrew Main reporting in The Australian 21/11/122:

The financial services minister, Bill Shorten, has ordered a review of the licensing rules for stockbrokers under the Corporations Act. The objective is to ensure that Australia’s market regulatory body, the Australian Securities and Investment Commission (ASIC) is equipped to extend its regulatory reach to the control of off-market transactions.

The proliferation of such market- making trading transactions bypassing the Australian Stock Exchange (ASX) has been greatly facilitated by the advent of high frequency trading (HFT). Although such traders seek only to scalp a few cents off each transaction, HFT confers a trading advantage that is capturing significant profits at the expense of both the ASX and institutional fund managers.

The proposal, to be implemented by June 2014, is to require brokers to demonstrate “meaningful price improvement” before they can be transacted away from the public (“lit”) market.

ASIC hopes to be able to introduce at the same time other regulatory requirements to limit the risk of market malfunction from automated trading through “rogue” algorithms.

Categories: Market Regulation


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