WELLINGTON, Nov 4 (Reuters) - An Australian regulator unveiled plans on Thursday to overhaul stock-market rules with the aim of encouraging new rivals to take on monopoly bourse operator ASX Group while protecting investors.
The onset of competition is expected to boost algorithmic trading and so-called "dark pools" of liquidity in Australia, raising fears of greater volatility and weaker transparency.
In releasing the proposed reforms for discussion, the Australian Securities and Investments Commission (ASIC) stopped short of demanding pre-trade transparency on large trades but said dark-pools operators should report to it regularly.
Dark pools are markets where blocks of shares change hands anonymously and outside traditional exchanges. They are favoured by institutional investors eager not to telegraph their trades.
ASIC has proposed that traders only display pre-trade orders of less than $20,000, but added: "Operators of dark pools must periodically report to ASIC on the nature and activity of trading on the pool. This will enable ASIC to monitor developments."
Competition from dark pools such as Nomura's Chi-X, due to start up in Australia next year, has been cited as a reason for the ASX to agree a $8.3 billion takeover by the Singapore Exchange this month -- though the deal faces political and regulator hurdles..
ASIC commissioner Shane Tregillis said the proposals aimed to maximise market efficiency and innovation but minimise risks. "We aim to be ready to implement competition as soon as practicable in 2011, when the necessary framework is in place and the market is ready," Tregillis said in a statement. The regulator also proposed rules designed to prevent anomalous trades and extreme movements such as the so-called "flash crash" on Wall Street in May, when some stocks lost more than three-quarters of their value.
ASIC wants feedback on the proposal by Jan. 21, 2011. They are detailed on www.asic.gov.au. (Reporting by Adrian Bathgate; Editing by Mark Bendeich)