ASIC restricts share trading

ASIC restricts share trading

First it was toilet rolls and pasta, but now some Australians may need to rein in their panic purchases (and sales) of stocks on the ASX as processing capacities are put under strain.

The Australian Securities and Investments Commission (ASIC) will make institutional investors or large equity market participants cut their number of executed trades by 25 per cent on levels seen last Friday.

The pre-emptive actions under ASIC Market Integrity Rules are aimed at keeping the market resilient following an environment of heavy trading over the past two weeks.

"This action will require high volume participants and their clients to actively manage their volumes," ASIC said.

"We do not expect these limits to impact the ability of retail consumers to execute trades."

ASIC claims 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," the regulator said.

The Australian Stock Exchange (ASX) has given its support to ASIC's decision, describing it as "sensible and measured".

"Recent trading volumes on both ASX and Chi-X have been unprecedented. This has presented operational challenges for the industry albeit the industry has worked together to ensure it has been able to function in these extraordinary circumstances," says ASX managing director and CEO Dominic Stevens.

"We recognise today's action by ASIC is only the first step, and that more consideration needs to be given to a permanent solution. 

"The industry cannot provide unlimited capacity at short notice. Regulators, exchanges, participants and investors will need to come to a decision on what they want for the future."

Stevens notes the stock market continues to collaborate with the industry.

"In addition to the steps we have taken to successfully complete our own operational processes during this period of heightened activity, we have worked closely with other market operators and participants to help them complete their operational processes.

"ASX shares the regulator's determination to maintain confidence in the integrity of Australia's financial markets and we will continue to cooperate with ASIC, other market operators and market participants."

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