Australian fund managers want levies to be charged on high-frequency trading firms that send an excessive number of trade orders to equity markets.
The Financial Services Council, which represents Australian money managers, pension funds and life insurers that invest more than A$1.9 trillion ($2 trillion) on behalf of 11 million Australians, also is considering whether a minimum time limit should be set before an order can be withdrawn from the market, according to a statement today on its website.
Australia, Hong Kong and Singapore are looking at tightening regulation of high-frequency trading amid concern trades that can be executed in under 10 microseconds may destabilize equity markets. The Australian Securities and Investments Commission, the national regulator, has cited Knight Capital Group Inc.’s $457 million loss in August and the American flash crash of May 2010 as examples of the need to examine whether tougher rules are needed.
“Australia is well-positioned to introduce regulation to avoid the adverse impacts of high-frequency and dark-pool trading experienced in Europe and the U.S.,” John Brogden, Financial Services Council chief executive officer, said in today’s statement. “The U.S. market is an example of what Australia can expect if action is not taken while there is a window of opportunity.”
ASIC Chairman Greg Medcraft has expressed concern that high-frequency trading provides “phantom liquidity” that can be quickly removed from stock markets. A taskforce at the regulator is studying the trading and is expected to report on its findings next year.
“We have argued strongly that the views of end customers, such as fund managers, need to be heard,” said Kristen Kaus, a spokeswoman for ASX Ltd., operator of Australia’s largest public equity exchange. “They are major users of Australia’s financial markets and offer important perspectives for decision-makers to consider.”