Australia passes tough new automated trading rules

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Not too long ago, Asia and Oceania loomed as the next hot spot for high-frequency trading. At a time when high-frequency trading was generating controversy and regulatory action in the U.S. and Europe, exchanges in Asia--notably Singapore, Japan, and Hong Kong--were making great strides toward upgrading their trading infrastructures to attract this sort of volume.

By one estimate, high-frequency traders account for roughly 15 percent of Asia-Pacific equity trading volumes. The conventional wisdom was that the percentage could go much higher. But the mood may be shifting. The Australian government has recently unveiled a set of measures aimed at curbing automated trading, suggesting that a grand re-think of HFT-oriented trading and market structure in general may be underway.

Some have called the move in Australia a "crack down," one that might intimate changes elsewhere in the world. The rules will be phased in during the next six to 18 months.

They "require exchanges and alternative trading platforms to introduce 'extreme trading controls' to prevent dramatic movements in the price of securities and impose new data reporting requirements to improve market surveillance," according to the Wall Street Journal.

In some ways, the new rules present a massive market structure move that affects the entire industry. The new rules require kill switches, new reporting standards and new pricing rules for dark markets. It's clear that the regulatory mood has changed over the past year, with market structure issues racing to the fore in many counties, not just the United States.

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