The Australian Securities and investments Commission (ASIC) on Wednesday launched the consultation on draft reforms to its market integrity rules for trading systems. The changes seek to harmonise rules across asset classes and streamline the current framework, as well as bring the rules in line with emerging international standards, the regulator said.

“As trading systems and algorithmic trading strategies are continually developed and improved, striving for greater efficiency, the guardrails in ASIC’s market integrity rules also need to adapt to changing market practices, technology and risks,” the Sydney-based regulator said in a statement.

“During periods of heightened volatility, financial markets may be especially vulnerable to risks from unexpected activity by trading algorithms or AI. Risks may be increased where AI is deployed with algorithmic trading, such as potential exacerbation of market volatility or ‘flash crashes’.”

The proposed rules cover the development, testing and monitoring of trading systems, including a ‘kill switch’ requirement for systematic trading. The regulator estimates 94% of SPI 200 futures and 46% of three-year Treasury bond futures trading is currently executed via algorithms.

The Australian Securities Exchange (ASX), which hosts the Aussie futures market, is in the midst of a technological upgrade as it seeks to recover from a failed back office system upgrade.

ASIC in June launched a compliance assessment of ASX as a market operator, with a wide-ranging remit to assess the exchange's ability to meet obligations under existing licenses.

Global regulators have stared working to safeguard resilience after a cyber attack on widely used technology provider ION Markets at the start of 2023 caused severe disruption to the global futures and options industry.

The European Banking Authority, the European Insurance and Occupational Pensions Authority, and the European Securities and Markets Authority in March published an opinion stating they had accepted amendments from the European Commission on new rules related to the Digital Operational Resilience Act (DORA).