ISN’s HFT concern not dampened by ASIC report

The Industry Super Network (ISN) has expressed continuing concern over high frequency trading (HFT) and the behaviour of HFT traders, despite a report released by the regulator yesterday which said concerns had been overstated.

ISN said it was committed to equity market reforms that improved market integrity and fairness, including its recommendation for electronic "call-auctions" to mitigate the "unfair advantages" held by HFT traders.

"We continue to be concerned about the practice of high-frequency trading and its impacts on long-term market participants such as super funds. In a high speed market, high speed traders have an advantage over other participants, including long-term investors," ISN director of regulatory policy Zachary May said.

May said ASIC's report into HFT and dark pools was an inflection point in the debate, particularly in regards to HFT.

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"A fundamental tenet of financial markets is fairness — a market where all participants access the market on a level playing field. Although technology has generally resulted in increasing fairness, high-frequency trading is challenging this," May said.

He said industry super funds invested for the long term and sought superior returns for members, and as such had a strong interest in a fair and orderly market.

May said policy makers and long-term investors needed to question whether they wanted the Australian market to mimic the US market.

"The question is whether the direction in which our market is headed is a direction that is good for growth, jobs and economic efficiency," he said.

He said Australia was protected during the global financial crisis (GFC) because of some of the prudent regulation that was wary of exotic practices from overseas financial markets.

"We believe that financial markets need to be viewed with the big picture in mind and with a focus on the future," he said.

ISN will continue to rally the Government behind its call auction proposal.