I was very curious what was goign on so i emailed ASX. Maybe...

I was very curious what was goign on so i emailed ASX. Maybe others are interested in reading what they emailed back
Dear ,

ASX refers to your online report on 24 November 2016 querying the trading in RED securities and in particular, whether the trading has been subject to market manipulation due to the small parcels of securities traded.

ASX would again like to thank you for making the time and effort to bring this matter to its attention. These types of communications are an important source of intelligence for ASX in performing its role of monitoring and enforcing compliance with the ASX Listing Rules. In this case, however, ASX regrets to advise that it is not able to take any action in relation to the matters you have raised.

ASX can only investigate and take action in relation to breaches of its Listing Rules. The matters you have raised are regulated by the Australian Securities and Investments Commission (“ASIC”) under the Corporations Act rather than under the Listing Rules. If you wish to pursue those matters further, therefore, you will need to do so with ASIC rather than ASX. More information about the types of matters that fall within ASX’s jurisdiction and those that fall within ASIC’s jurisdiction can be found it on our website at:
http://www.asx.com.au/documents/about/corporations-act-vs-listing-rules-matters.pdf

That said, your observations were passed on to the ASX Surveillance unit for analysis, which reviewed the recent trading in RED. Surveillance noted that there were many small parcels traded and considered that these were most likely the result of a DMA (Direct Market Access) or algorithmic trading programme used by a broker which may have been attempting to match the VWAP in RED. Trading such as this is typically not considered to be manipulative, although the presence of algorithmic trading in Australian financial markets is a controversial issue which continues to be monitored by ASIC.

Most brokers now use trading applications such as trading algorithms to enter orders into the market. These algorithms have varying styles and execution strategies based on the historical data on which they are modelled and allow orders to be sent directly on to a trading platform without human intervention. One form of DMA trading involves a strategy whereby a single order might be split up into several smaller orders which are submitted periodically (say, every 3 minutes).

This type of DMA trading is normally unremarkable and has no impact on the price or volume of a stock. However, occasionally market observers may see small volume orders being submitted to a trading platform in a less liquid stock which result in small volume trades. This does not necessarily mean that a low execution trade size, even as low as one share itself, is manipulative. Repeated one share executions may be part of a broader legitimate algorithmic execution strategy. Small execution trade sizes (by definition) are unlikely to give a misleading appearance for a product, particularly of active trading.

In this regard ASX does not set rules or limits concerning the minimum trade size or order size (with the exception that new opening positions cannot be created of a value below $500), allowing ASX Participants to enter orders of any size, with the size of the order being left to the discretion of the broker or its client.

Should you still have concerns about the trading in RED you should feel free to raise them directly with ASIC. You can do this via its complaint portal at http://www.asic.gov.au/complain.


Kind regards,
ASX Customer Service
ASX Limited | 20 Bridge Street | Sydney NSW 2000
t: 131 279 | e: [email protected] | f: +61 2 9227 0885
w: www.asx.com.au