Regulators have decided against imposing restrictions that would have further curbed computer-driven and off-market share trading, claiming recent regulatory changes are already having the desired effect.
In a significant win for the Australian Securities Exchange, the Australian Securities & Investments Commission said it had decided against introducing a rule that would have required high-frequency traders to allow an order to rest in the market for a minimum half a second.
The proposal followed investor concerns at the huge number of small order messages that are placed and withdrawn in less than that time by HFT outfits testing out the price and direction of trade in listed stocks.
But ASIC chairman Greg Medcraft told the annual stockbrokers conference in Sydney yesterday that since the regulator went public with its concerns in March and introduced a levy on trade orders, the number of so-called fleeting orders had fallen by 55 per cent.
The supervision levy will increase by 37 per cent from July and is expected to further reduce untraded order numbers. But Mr Medcraft said the proposal remained on the table if the amount of "noise" in the market returned to "problematic" levels.
"I want to be very clear that we remain committed to ensuring investors have confidence in our markets and noise from excess messages remains at manageable levels," Mr Medcraft said.
The proposal is a second win for the exchanges because it will allow high-frequency trading to continue, generating trade fees for ASX and rival Chi-X. It follows the introduction of regulation to drive more trading activity away from dark pools operated by exchanges and brokers that do not generate trade fees for the exchanges, and back on to the lit market.
