The Australian Securities and Investments Commission has released a report into the impact of dark liquidity and high-frequency trading (HFT) on Australian financial markets, concluding that concerns tend to be overstated and disproportionate to the risk posed by the practices.

The report concluded that public concerns over HFT are inflated, and found no evidence of systematic manipulation of markets by high frequency traders.

However, the report did conclude that HFT practices are being taken up with a gusto by many other algorithmic traders, including large institutional traders.

“Many issues can be dealt with by existing regulations and there has been a marked change in the professional traders' behaviour during the course of the ASIC study,” ASIC Deputy Chairman Belinda Gibson.

The report found that high-frequency trading in Australia is dominated by a small group of trading entities with the 20 largest entities accounting for about 80% of all HFT turnover (or 22% of total equity market turnover).

The ASIC taskforce found that while the volume of dark trading has remained around 25-30%, the composition of dark liquidity and market participant-operated dark venues (crossing systems) has changed significantly. There are now 20 crossing systems operated by 16 market participants and they have started to connect to one another.