The Australian Securities & Investments Commission's plan to discourage high-frequency traders from using "dark pools" has been criticised by industry superannuation funds.
Industry Super Network head of regulatory policy Zak May told a Melbourne business conference that ASIC's proposals to put time limits on some of the super-fast trades made by hi-tech algorithms would only encourage more subterfuge by investors in off-market systems, or dark pools.
"If you require a minimum resting time or certain types of orders, you (high-frequency traders) are still able to respond more quickly," he said.
"So it creates a risk for people if there's a required minimum resting time. It's about creating a level playing field."
May's critique came during a panel session in which he was speaking alongside ASIC head of market supervision Greg Yanco and ASX general manager of trading services Paul Raper.
Raper also said that setting minimum time limits on trades would create a more complex market in which high-frequency traders operating in dark pools would thrive.
The advent of high-frequency trading has caused much concern in some areas of the investment community, with many believing long-term and retail investors are disadvantaged. According to a recent report by ASIC, high-frequency trades account for 22 per cent of total equity market turnover. But ASIC believes most small, sub-$500 trades are by brokers, not high-frequency traders.
Earlier Yanco said that the regulator had found nothing inherently wrong with high-frequency trading, saying that the market was created for all kinds of investors.
"The longer-term investors are now taking advantage of technology as much as high-frequency traders," he said.
"In ASIC's view the market is fair, even with co-location facilities, and we also have the benefit of a 10 billion microsecond gap, which is 10 minutes, between the time a price-sensitive announcement is released and trading starts again."
But May said market data on trades, which people also traded on, was not released with a 10-minute gap.
