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13-036MR ASIC publishes fifth market supervision report
ASIC today published its fifth report on the supervision of Australian financial markets and market participants.
Report 327 ASIC supervision of markets and participants: July to December 2012 (REP 327) shows ASIC achieved key regulatory and enforcement outcomes during the reporting period, including:
27 markets matters were referred for investigation. These matters involved potential insider trading (6), market manipulation (6), possible breaches of the market integrity rules (12) and of the continuous disclosure obligations (3).
Four individuals were handed sentences for insider trading.
The Markets Disciplinary Panel (MDP) issued seven infringement notices with penalties of up to $80,000.
There were also six instances of alleged breaches of the market integrity rules referred to enforcement, principally around late lodgement of annual and monthly capital returns.
As in previous reporting periods, problematic algorithms and the effect of high-frequency trading algorithms continue to be of concern. In particular, wash trades (which occur when one account executes both sides of the trade) are a significant obstacle in maintaining fair and orderly markets. The existence of the high-frequency trading taskforce allowed ASIC to actively and candidly engage with market participants on this topic and, in some cases, get swift corrective action.
ASIC Deputy Chairman Belinda Gibson said: ‘ASIC continues to strengthen investor confidence in the integrity of our markets, as we refine our surveillance of Australia’s financial markets. ASIC has also significantly reduced the time taken to commence investigations into suspicious market conduct.
‘Of the 138 market matters referred to ASIC’s enforcement team for investigations since ASIC assumed responsibility for market supervision in August 2010, 42 were made within 30 days of identifying the possible misconduct, and 93 were made in less than 60 days.’
ASIC’s Senior Executive Leader of Market and Participant Supervision, Greg Yanco, made specific reference to the establishment of taskforces to consider issues relating to dark liquidity and high-frequency trading (HFT). ‘The work undertaken by these taskforces, as we foreshadowed in our last report, buttressed our surveillance and policy work. Five HFT matters were referred to enforcement, and since the end of the reporting period, the dark liquidity taskforce has also referred a matter to enforcement for investigation.
‘As always, ASIC has worked closely with market participants on matters relating to problematic algorithms, in particular wash trades – which occur when one account executes both sides of the trade. Active engagement with market participants has allowed for swift corrective action when things do go wrong.’
ASIC assumed responsibility for market supervision and real-time surveillance of trading from ASX on 1 August 2010. This now includes supervision of Chi-X Australia, which commenced operations on 31 October 2011. ASIC supervises compliance with market integrity rules, compliance with the Corporations Act 2001 and ensures that Australian financial services licence conditions are met by market participants.