Australia Proposes Modernization of Trading System Rules to Address Algorithmic Dominance

ASIC is overhauling market integrity rules to keep pace with algorithmic trading's dominance, which now accounts for 85% of Australian equities and 94% of SPI 200 futures activity. The reforms aim to standardize safeguards across asset classes while aligning with IOSCO principles on automated trading.

The regulator seeks to eliminate regulatory arbitrage by applying consistent standards to all trading systems—whether AI-driven or conventional. This comes as Treasury bond futures show 46% algorithmic penetration, revealing uneven adoption across derivatives markets.

Market infrastructure upgrades target volatility risks, particularly during flash crash scenarios where runaway algorithms could exacerbate price swings. The proposals implicitly acknowledge that legacy frameworks designed for human traders are obsolete in today's hyper-automated markets.