ASX Group wants only orders of $50,000 or above to be able to be funnelled into so-called dark trading pools and wants companies such as Liquidnet to get a license to operate a dark pool.
The operator of the Australian Stock Exchange says such recommendations to the Australian Securities and Investment Commission is still being considered.
ASIC wants to wait until there is evidence of a major shift to dark pool from lit pool trading.
Dark-pool trading is where investors, traditionally with large blocks of stock to buy or sell, execute transactions with investors of similar appetite off exchange.
The objective of dark pool trading is to minimise information leakage that may adversely impact the price at which the stock is bought or sold.
“We think the integrity of the lit book is of paramount importance,” says David Stocken, head of institutional sales, Australian Securities Exchange.
“We would hate to see a major shift from lit to dark book matching. Dark pools should get a market operator’s license,” he says.
Stocken says about 25 per cent of all turnover on the stock exchange are high-frequency trades, mostly around the largest 200 companies in terms of market value.
High-frequency traders buy shares but hold them for only a few seconds before selling them. Typically their orders are small and they do not hold positions overnight.
Stocken spoke on the sidelines of a conference organised by Conexus Financial, publisher of I&T News.