March 18, 2020 / 9:36 AM / 22 days ago

Australia regulator urges banks to abide by new high frequency trading rules

March 18 (Reuters) - Australia’s securities regulator said on Wednesday it is holding discussions with investment banks to ensure they are following new rules introduced this week aimed at preventing an overload of market systems.

The measures, which followed a huge spike in trading on Friday amid panic about the coronavirus epidemic, require top brokers to cut daily trading volumes by 25% from Friday’s levels. They are aimed at limiting high frequency trading, but apply to all trades for the top banks on Australia’s main board and Chi-X, a secondary board.

Calls between Australian Securities and Investment Commission (ASIC) officials and the equities heads of nine major banks took place on Wednesday and will continue Thursday.

The regulator is due to publish figures on Thursday that will show whether the brokers have met the new requirement.

“ASIC’s markets team is closely monitoring the market, liaising continuously with brokers and other market participants and closely following developments to ensure the markets trade in an informed and orderly fashion,” a spokesman said in an emailed statement to Reuters.

Some of the banks involved in the ASIC talks argued the trading reductions were too strict and tough to implement, two sources with knowledge of the discussions said. They declined to be identified because of the sensitive nature of the discussions with regulators.

Bankers from UBS, Barclays, Credit Suisse , Goldman Sachs, Bank of America, Citigroup, Morgan Stanley, JPMorgan and Macquarie have been involved in the ASIC discussions this week, according to an ASIC spokesman.

The Australian Securities Exchange recorded a record 5.1 million trades on Friday, well up from its daily average of 1.7 million over the past seven months, according to exchange data.

A large number of the trades on Friday were single share transactions created by algorithmic trading platforms, according to a source with direct knowledge of the matter, declining to be identified as the information has not been made public.

UBS said in an emailed statement that it was fully supportive of the new ASIC measures. Goldman Sachs, Citigroup, Bank of America, Macquarie and Barclays declined to comment. JPMorgan, Credit Suisse and Morgan Stanley did not immediately respond to a request for comment. (Reporting by Scott Murdoch in Hong Kong; Editing by Edwina Gibbs)

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