asic reply to asx bot speeding ticket, page-13

I queried Commsec on conditional trading where a buy/sell order is placed in advance of the required price. I wished to know whether 3rd parties had access to this information as can happen in US. The reply is below. I think the algorithm trading programs work in a different fashion to the normal small trader. Firstly the big selling/buy order does not appear in the market depth. The ASX only gave you the 'average' sell order for MEO, not the high and low volume of orders processed. If you watch 'order of sales' when a BOT is operating you will notice the peculiar volumes occur at small changes in price. That is because the BOT is following the price and market depth in a predetermined program to control the trading. Popping in small trades when required to slow or speed up the price movement. Without a program it would be difficult. So the small trader is only able to see a little information on the screen of the real depth/market. Many would see a lot of trades going through as bullish when really a big dump is going on. So I ignore volume and depth now, but follow actual trades and their pattern. BOT trades volume have typical strange amounts, hence my volumes are always done in odd amounts also, never ending in 0 or 5. My analysis may not be spot on but close.


From Commsec
Thank you for your email.

Australia's market structure is different to that of the New York Stock Exchange; the ASX uses a straight through processing system where the trade goes directly into the market and not via a market maker.

All trades in ASX-listed equities (shares) take place on computers. Warrants, company options, interest rate securities and Exchange Traded Options are also traded on computers. Among others, equities, warrants, company options and interest rate securities are traded on ITS (Integrated Trading System). ITS is the Australian Stock Exchanges computerised trading system. Members of the public do not have direct access to ITS, but place orders on ITS by telephoning their broker or by trading on-line. Brokers enter these orders into ITS. If you trade on-line, your order is sent to your Brokers office and entered into ITS. Depending upon your Brokers setup, your order may be entered into ITS automatically through Automated Order Processing. When viewing your order or stocks through your online account, you may see some codes next to the stock.

ITS matches buy and sell orders then trades them automatically. Best priced orders have priority. If there is more than one order at the same price, the order that was placed first takes precedence. Large orders have no priority over small orders.

Commsec reply was quick and answered my question. I suggest people ask their broker first about program trading as they are closer to the action.