In a bid to improve transparency, Australia government has issued new rules affecting dark pools and high frequency trading (HFT).
The new rules mandates Australian dark pool operators to give investors the choice to opt out of trading in their systems and operate by a common set of procedures that do not discriminate between users.
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The new rules include the public disclosure of information so that markets users can understand how their orders may be handled and executed and find details on the operation of dark pools disclosed to clients.
Furthermore, dark pool operators will be responsible for notifying users and Australian Securities and Investments Commission (ASIC) about system issues as soon as possible.
The rules will be implemented in stages over a nine-month period, with ASIC issuing guidance to clarify their application.
Minister Assisting for Financial Services and Superannuation David Bradbury said: "These rules provide improved investor protection in dark pools by requiring dark pool operators to improve transparency of their market’s operation and restricting preferential treatment for some investors. The rules also improve market integrity by harmonising market manipulation rules across licensed markets."
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By GlobalData"The Government is acting to ensure that investors have continued confidence in Australia’s financial markets. These new rules address investor concerns while also ensuring the benefits continue, such as investor choice and competition to lit markets from dark pools, and liquidity benefits from high frequency trading."
These rules will come into force in stages over a nine month period. ASIC will also issue guidance to clarify the new rules and expectations of market operators and participants.
