ASIC has outlined its expectations for all market participants to act appropriately to ensure Australia’s equity markets remain resilient.

In a letter published today [14 May, 2020], all equity market participants are requested to take reasonable steps to ensure the number of trades matched from their orders:

• are capable of being handled by their internal processing and risk management systems and, if applicable, their clearing and settlement operations; and
• support the fair and orderly operation of Australian equity markets.

Directions issued to nine large equity markets participants to limit the number of trades executed each day have also been revoked. This is due to:

• enhancements to trade processing made by market operators and the clearing and settlement facilities;
• the positive actions taken by these participants to reduce their number of executed trades, which has contributed to more efficient settlement preparation and reduced failure rates;  and
• the stabilisation in overall trading activity.

ASIC will closely monitor the behaviour of participants and take further action where necessary. ASIC will also undertake a review of the broader trends in trading activity, and where appropriate consult with industry on any proposed regulatory changes.

Background

On 13 March 2020, the equity market exceeded the number of trades that could be reliably processed on a single day.

To manage the risk to the market system, ASIC issued directions on 15 March 2020 (under the ASIC Market Integrity Rules (Securities Markets) 2017) to nine large equity market participants, requiring those participants to limit their number of trades executed each day until further notice (refer to 20-062MR).