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Monday 16 March 2020

20-062MR ASIC takes steps to ensure equity market resiliency

As part of the Australian Government’s response to the novel coronavirus (COVID-19), ASIC has taken steps to ensure Australian equity markets remain resilient.

Australian equity markets have seen record trading volumes in the last two weeks. ASIC, along with the other Council of Financial Regulators agencies, have been closely monitoring financial markets to ensure they remain fair and orderly. Australian markets have been strong and resilient over this period, and this action is pre-emptive and intended to maintain those high standards.

In addition to increasing volumes, Australia’s equity markets have seen exponential increases in the number of trades executed, with a particularly large increase in trades last Friday, 13 March. While there was no disruption to market operations on Friday, there was a significant backlog of work required to be undertaken over the weekend by the exchanges and trading participants. If the number of trades executed continues to increase, it will put strain on the processing and risk management capabilities of market infrastructure and market participants.

Accordingly, ASIC has issued directions under the ASIC Market Integrity Rules to a number of large equity market participants, requiring those participants to limit the number of trades executed each day until further notice. These directions require those firms to reduce their number of executed trades by up to 25% from the levels executed on Friday. This action will require high volume participants and their clients to actively manage their volumes. We do not expect these limits to impact the ability of retail consumers to execute trades.

ASIC will continue to closely monitor market conditions and take action where needed to ensure markets remain fair and orderly.