ASIC proposes equity market competition

The Australian Securities and Investments Commission (ASIC) has released a consultation package on enhancing regulation of Australia’s equity market, proposing the introduction of competition between exchange markets as soon as 2011.

ASIC’s consultation paper and its report, ‘Australian equity market structure’, review recent and likely trends in global and Australian equity markets, including the 6 May ‘flash crash’ in the United States, high-frequency and algorithmic trading and the lessons from other jurisdictions that have introduced competition between exchange markets.

The regulator’s proposals address specific issues, such as best execution and pre-trade transparency, which are needed for competition, as well as trading during trading halts and consolidation of market data, among others.

ASIC commissioner Shane Tregillis said technology and competition are fundamentally changing the way Australian equity markets operate, adding the proposed regulatory framework would aim to maximise market efficiency and minimise risks to investor confidence.

“As overseas experience has demonstrated, it remains essential that investors and companies have confidence in our equity markets as efficient places to raise capital and where secondary trading is fair, orderly and transparent,” Tregillis said.

ASIC recognised market participants would need time to adapt to the new environment, he said.

“We will be engaging closely with industry in developing the proposed regulatory framework and systems to support competition in the Australian market."

The deadline for feedback on ASIC’s proposals is 21 January, 2011.