Australian Regulator Investigates Spoofing as ASX Futures Expire

  • ASIC sees excessive cancellation of orders as contracts expire
  • HFT, dark pools not adversely affecting markets, ASIC says

Australia’s regulator is looking at whether spoofing is occurring in the futures market during the quarterly expiry of equity-index and bond contracts.

The Australian Securities & Investments Commission is investigating a number of traders for excessive order entry and cancellation on a derivatives platform run by ASX Ltd., the country’s main exchange operator, said Joe Barbara, a Sydney-based senior market specialist at ASIC. Trading behavior has gotten less suspicious since the inquiry began, he said.

“If we have a market where there are orders that have no real intent to trade behind them, we’d end up having a market that was full of gaming and traders playing gaming strategies,” Barbara said in a phone interview. “On the latest expiry it certainly seems to be the case that the traders involved were still participating, but the game to which we’re referring to didn’t seem to be played with the same intensity.”

Spoofers attempt to profit by placing orders they never intend to fill, causing prices to change, and then canceling the orders.

Some 93 percent of Australian futures trading takes place on equity-index and bond contracts, the regulator estimates. The three- and 10-year debt derivatives that change hands on ASX Trade 24 are among the top 10 most-traded interest-rate products globally, according to the exchange operator’s website.

Current levels of high-frequency trading and dark liquidity are not adversely affecting the function of Australian markets, ASIC concluded Monday after completing an examination of the industry.

Matthew Gibbs, a Sydney-based spokesman for ASX, didn’t immediately reply to a phone message seeking comment for the company.

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