The Australian Securities and Investments Commission (ASIC) has published a letter to all equity market participants this Thursday, reminding them to act appropriately in order to ensure Australia’s equity markets remain resilient.

In particular, the Australian regulator has requested that all participants 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.

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Furthermore, the authority has also revoked its directions issued to nine large equity markets participants to limit the number of trades executed each day. As Finance Magnates reported, ASIC told large equity market participants to limit the number of trades executed each day on the 15th of March. 

Under the watchdog’s directions, firms had to reduce their number of executed trades by up to 25 per cent from the levels executed on the to Friday prior to the letter being sent. Therefore, high volume participants and their clients had to actively manage their volumes.

ASIC eases measures as volatility lessens

ASIC has decided to ease its measures following the equity market participants taking the appropriate steps to reduce their number of executed trades. According to the watchdog, this has contributed to the more efficient settlement preparation and reduced failure rates, combined with the overall stabilisation of trading activity, as COVID-19 volatility lessens.

“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,” the regulator said in its statement today.

Following ASIC’s statement, the Australian Financial Markets Association (AFMA) has welcomed the guidance in relation to the volume of share trading for equity market participants.

“AFMA acknowledges the steps taken recently by market participants, ASX and Chi-X to ensure that the equity market remains resilient during periods of exceptionally high volume trading,” the industry body said.

“The Australian equity market is highly regarded, both as a source of capital for Australian companies and as a venue for investors to trade listed shares. This supports the national economy.”