ASIC is aware of ongoing order activity issues in the ASX 24 quarterly roll markets leading up to the expiry of the following contracts:
- ASX 24 Three Year Commonwealth Treasury Futures
- ASX 24 Ten Year Commonwealth Treasury Futures, and
- ASX 24 SPI 200 Index Futures.
It appears that a small number of participants and clients may be using multiple gateways and trading accounts to ‘crowd out’ other participants and clients through order proliferation at the opening of each trading session in the week before the expiry for the relevant contracts. This conduct floods the quarterly roll markets with multiple quotes and cumulative volumes that are substantially higher than the levels actually traded.
The pattern of order activity suggests that some participants and clients are submitting orders to gain higher price/time priority in the bid/ask spread, and cancelling orders with unfavourable priority before an opportunity to trade on them arises. As a result, other participants and clients seeking to trade in the roll have to cross the spread at an expense.
ASIC has been monitoring this behaviour for some time and is concerned that it is becoming more prevalent. We estimate that more than 20,000 orders per quarter are affected by this behaviour. We are investigating a number of instances of this conduct and will take action where we identify breaches of the ASIC Market Integrity Rules (ASX 24).
Participants must ensure they comply with Rule 3.1.2 (ASX 24) (false or misleading appearance) and Rule 3.1.3 (ASX 24) (entering orders without an intent to trade). Participants must ensure that each order is entered with the intention of trading the volume entered.
Order behaviour that ASIC examines in determining whether there is an intent to trade an entered order includes but is not limited to, one or more of the following; order entry patterns, cancellation patterns, position accumulation, wash trading, financial capacity to fund orders placed and intra-day positions accumulated