sec to create large trader reporting system, page-5

Encl. copy of letter received from ASIC. If you remember the gist of my letter to them was, that I did not believe they were capable of supervising the market, as they did not have the expertise, equivalent to the writers of the programs,you will read that the answer by them , once again, did not address the point I made. I will write to them pointing this out. Here is their letter.


Thank you for your correspondence of I April 2010 raising concerns about the
integrity of ASX Ltd in conducting a fair market and the proposed changes to the
sup ervi sion of Australia's financial markets.

Supervision of Licensed Markets

Under the current regulatory regime, all financial market operators such as ASX must
obtain an Australian Market Licence under the Corporations Act 2001 ("the Act").
The market operators are responsible for the supervision of market participants and
listed entities, while ASIC is responsible for ensuring that the market operator meets
its statutory obligations.

ASX holds an Australian Market Licence under Part7.2 of the Act. The general
obligations of a market licensee are set out in section 192A of the Act and include an
obligation to do all things necessary to ensure that the market is a fair, orderly and
transparent market; and the market licensee must have adequate arrangements for
supervising the market.

ASIC regularly conducts an Assessment of all market licensees' compliance with their
obligations. The Australian Securities Exchange Market Assessment Report ts
available on our website: www.asic.gov.au. The report details various actions and
recommendations made by ASIC and we refer you to this document for further
information regarding ASIC's assessment of the ASX.

Both ASX and ASIC identify suspicious conduct that may impact on the ASX's
market and which may constitute a breach of the ASX listing rules, ASX market rules
r the Act. ASX is required to notify ASIC of any actual or suspected significant
breach of its operating rules or the Act.

Changes to Supervision of Trading

On24 August 2009, the Australian Govemment decided to transfer responsibility to
ASIC for the supervision of real-time trading on Australia's domestic licensed
markets. This change, which will take effect on 1 July 2010, will mean that ASIC will
become responsible for supervising trading activities by market participants that take
place on a licensed financial market, and for supervising the conduct of persons in
relation to domestic licensed financial markets. Market operators will retain
responsibility for monitoring and enforcing compliance with the remaining operating
rules, including listing rules for entities listed on their exchange.

ASIC has proposed new ASIC Market Integrity Rules for ASX and details of the
proposed framework are set out in ASIC Consultation Paper 131 (available on our
website).

Algorithmic Trading

You have raised concems generally about algorithmic trading, also known as "1og
trading" or "bot trading". ASIC works closely with ASX to ensure adequate
supervisory arrangements are in place to supervise algorithmic trading. The
arrangements include appropriate checks on ASX clients prior to enabling clients to
utilise the technology to facilitate such trades; setting trading limits for clients;
automated filters that check for compliance with the regulatory framework in real-
time; and review mechanisms following such trades.

Further information regarding algorithmic trading can be found on the ASX website at
www. asx. com. aulresources/educatiorVbasics/algorithmic_trading.htm.

Further information

If you would like any further information about ASIC's role and the proposed changes
to the regulatory framework for market supervision, please visit the Markets page on
ASIC's website or the website for the Minister for Financial Services, Superannuation
and Corp orate Law at www.mfsscl. treasury. gov. au.

Thank you for raising your concerns with us as the information we receive from the
public assists ASIC in working to build conf,rdence in the integrity of the capital
markets.
dnvan

Posts: 46
Joined: Thu, Feb 25, 2010, 9:42pm