REGULATORS should strive to make it unprofitable for high-frequency traders to front-run markets, says Australian Securities Exchange chief executive Elmer Funke Kupper.
His approach contrasts with the more freewheeling model in the US.
“We want to continue to tighten the economics of the practice,” Mr Funke Kupper said in an interview with Dow Jones Newswires and The Wall Street Journal.
Growth in high-frequency trading (HFT) is a newer development here than in the US and Europe. Australia only opened up its stockmarket to exchange competition less than a year ago as part of a plan to lower trading costs and improve liquidity.
In the months since then, new competitor Chi-X has drawn some trading away from ASX, while trading in off-exchange venues such as dark pools has grown significantly.
High-frequency traders have begun trading more in the country as a saturation of their strategies has begun to dampen their profits in the US.