Trade execution on trading platforms

In April 2014, the Council of Financial Regulators (CFR) released a report on the Australian over-the-counter (OTC) derivatives market. In the report, the CFR indicated that it is not yet appropriate to recommend a mandatory platform trading obligation, for three key reasons:

  1. Before making any recommendation on mandatory platform trading, the CFR would prefer to see further consensus emerge across key jurisdictions on the characteristics of relevant trading platforms for such purposes.
  2. Survey data on market liquidity, and the extent to which Australian participants are using non-fully electronic execution channels, suggest that liquidity in the local market is not high by international standards in many asset classes. They also suggest that market participants continue to predominantly use other execution channels, presumably for a range of commercial reasons.
  3. Treasury is undertaking a review of the AML regime, and the CFR would prefer to await the outcome of that review prior to recommending any mandatory trading obligations.

The CFR said they would nevertheless continue to monitor developments to gauge the implications of overseas regimes for methods of execution and liquidity in the Australian OTC derivatives market, and more generally monitor evolving trends in the utilisation of electronic trading platforms.

The CFR is expected to address this issue again in a forthcoming market assessment in 2015.

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Last updated: 23/03/2016 03:09