The Australian Securities and Investments Commission (ASIC) has, for the first time, put a legal definition on what counts as a trading algorithm. The move sits at the center of a broader update to the rules governing automated and AI driven trading on Australian markets, announced this week by the regulator.
Brokers, exchanges and trading firms have until March 2028 to comply, giving the industry more than a year to rework their systems, testing procedures and internal controls before the new obligations become mandatory.
London's trading industry is coming home!
What Counts as a Trading Algorithm Now
The rules define a "Trading Algorithm" as software that automatically decides one or more parameters of an order, such as whether to place it, its timing, price or quantity, or how to manage it afterward, with limited or no human input.
The definition excludes systems that only route orders, submit them without setting parameters, generate confirmations or handle post trade processing. Alongside it sits a technology-neutral definition of "Trading System," covering any system that registers trading messages for submission to a platform, regardless of how those messages are generated.
Participants using trading algorithms will need documented governance and testing procedures, qualified staff to build and test the algorithms, kill-switch controls that can suspend individual algorithms without shutting down the entire system, and seven years of compliance records.
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ASIC has also scrapped the long-standing Designated Trading Representative role, and simplified certification so that one responsible officer, rather than two directors, needs to confirm accuracy.
"Market participants are important gatekeepers," said ASIC's Commissioner Simone Constant. "These reforms strengthen the controls they must have in place to test, monitor and govern trading systems and algorithms, helping protect the integrity and resilience of Australian markets as technology and AI continue to evolve."
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A Longer Runway, a Narrower Rulebook
Industry feedback shifted some of the details. A proposed requirement for "real-time" monitoring became "immediately," which ASIC defines as promptly and without delay, after submissions argued that true real-time detection is not always achievable.
The manipulation rules were also broadened to address agentic AI directly. Participants must now weigh the effect of an order that creates a false or misleading appearance, even when no person intended that outcome, a direct response to systems that can initiate or adapt trades without explicit human direction at the time.
The Futures Industry Association had urged ASIC toward this kind of clarity and international alignment, telling the regulator during consultation it would "strongly support efforts to strengthen market integrity" through clearer algorithm rules, while pressing for closer consistency with Europe's MiFID II framework. ASIC says the changes bring Australia closer to IOSCO principles, and its parallel consultation on guidance would retire one existing regulatory guide entirely while cutting the volume of related guidance by close to 60 percent. Feedback on that guidance closes November 5, 2026.
A separate 2025 ASIC estimate put algorithmic trading at roughly 85 percent of ASX equities volume and as high as 94 percent in SPI 200 futures.
The reforms target order-generating logic specifically, not the client-facing AI layer that platform vendors have been building out.
