Treasury has prompted a review of Australia’s financial market regime in an attempt to regulate dark pools. The dark market has its advantages for institutional investors wanting to buy or sell large blocks of securities without impacting the market, but it can also disadvantage some market participants, as they can’t see the trades before they are executed.
Submissions for the review closed today,
In its submission to Treasury, Chartered Secretaries Australia (CSA) supported the ASX recommendation of a $25,000 threshold to be implemented; below which, all orders must be executed on the lit market.
“We’re of the view that what is most important is an efficient market. An efficient market depends on full transparency and all information known by everyone,” said CSA’s chief executive Tim Sheehy.
Sheehy said small investors, including the clients of financial planners, became the “unintended victims”, as more and more trades were taking place in the dark market rather than the lit market.
“[There could be] buy and sell prices being set that they don’t have access to that are different than what they see in the lit market; that’s not transparent, that’s not efficient, and that’s not a level playing field.”
“The concept of creating one pool of investor over another undermines confidence in the market and could well open the door to market manipulation.”
Sheehy said there was nothing investors could do, but to go through their associations such as the Financial Planning Association, or the Australian Shareholders’ Association to make a submission to Treasury.
FPA general manager policy and standards Dante De Gori said the FPA did not provide a direct submission on the matter.