Consultation Paper 386—Proposed amendments to the ASIC market integrity rules: Trading systems and automated trading

Submission Date: 20 October 2025

This submission is made by the Corporations Committee of the Law Council of Australia (Committee) in response to ASIC Consultation Paper 386 (CP 386), released on 27 August 2025. The Committee welcomes ASIC’s objective of modernising the market integrity rules to reflect technological developments, including algorithmic and AI-driven trading. However, the Committee has concerns about particular proposals that, if implemented as drafted, would increase compliance burdens and could have unintended consequences for market functioning, competition and market resilience.

The Committee’s primary concerns are:

1. the proposal for real‑time monitoring of trades by market participants and trading venues;
2. the proposals to harmonise obligations across the cash and futures markets without sufficient recognition of the different operational, liquidity and risk profiles of those markets;
3. to seek clarification on testing requirements and whether testing should cover both algorithms and associated filters/controls;
4. to recommend a minimum 18-month transition period with assurance of no liability during transition;
5. to support internal responsibility for review and certification, rather than requiring external experts;
6. to recommend narrowing the definition of ‘Trading Algorithm’ to execution-related functions only; and
7. to request clear definition of ‘materiality’, aligned with Automated Order Processing standards.

The submission explains these concerns and suggests implementation approaches that preserve ASIC’s policy objectives while avoiding disproportionate implementation costs and operational disruption.

Executive summary

The Committee supports ASIC’s stated policy goals of ensuring resilience and robust governance of trading systems, clarifying obligations for automated trading and aligning the domestic rules with international best practice. The Committee also supports targeted measures that improve transparency, incident response, and testing of algorithmic strategies.

At the same time, the Committee considers that the proposal to require real‑time monitoring across the board would impose substantial systems, staffing and cost burdens that are not proportionate to the risks in many cases. The Committee believes that this would be the case for smaller participants, as well as larger participants who adopt global systems. There is also limited published quantitative analysis of the expected costs to participants or to the marketplace as a whole.

The Committee therefore recommends that ASIC: (a) allow for a risk‑based, proportionate monitoring approach; and (b) allow firms to meet outcomes through existing pre-trade and post-trade controls.

On harmonisation between cash and futures MIRs, the Committee accepts that alignment is desirable where risks and operating models are similar, but recommends ASIC adopt a more calibrated approach that recognises the distinct liquidity profiles, clearing arrangements, and product architectures of futures markets. Certain prescriptive provisions applicable in the ASX‑listed cash securities context may be inappropriate for futures markets or for market participants that operate across asset classes under differing settlement, collateral and margining regimes, particularly having regard to the likely impact on smaller futures market participants.

The Committee further recommends that ASIC:

1. extend the proposed transition period to at least eighteen months, coupled with appropriate liability protection during the transition phase. ASIC should also formulate and settle, with appropriate consultation, its regulatory guidance so that participants have a clear understanding of how to implement the rules;
2. confirm that review and certification of algorithmic systems may be conducted internally by appropriately senior and independent personnel, rather than requiring external experts;
3. tighten the definition of “Trading System” to better scope the system to which the proposed obligations apply;
4. refine the definition of “Trading Algorithm” to focus on execution-related functionality, excluding broader operational or administrative processes; and
5. provide clearer guidance on the concept of “materiality” in system changes, aligned with established Automated Order Processing standards.

Last Updated on 11/11/2025

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