ASIC Defines Trading Algorithm, Sets March 2028 Compliance Deadline

The Australian Securities and Investments Commission (ASIC) has introduced a legal definition of a trading algorithm as part of a broader update to rules governing automated and AI-driven trading on Australian markets. The regulator announced the changes this week, giving brokers, exchanges and trading firms until March 2028 to comply.

Under the new rules, a "Trading Algorithm" is defined as software that automatically decides one or more parameters of an order—such as whether to place it, its timing, price or quantity, or how to manage it afterward—with limited or no human input. The definition excludes systems that only route orders, submit them without setting parameters, generate confirmations or handle post-trade processing. A separate technology-neutral definition of "Trading System" covers any system that registers trading messages for submission to a platform, regardless of how those messages are generated.

Participants using trading algorithms will need documented governance and testing procedures, qualified staff to build and test the algorithms, kill-switch controls that can suspend individual algorithms without shutting down the entire system, and seven years of compliance records. ASIC has also scrapped the long-standing Designated Trading Representative role and simplified certification so that one responsible officer, rather than two directors, needs to confirm accuracy.

ASIC Commissioner Simone Constant said, "Market participants are important gatekeepers. These reforms strengthen the controls they must have in place to test, monitor and govern trading systems and algorithms, helping protect the integrity and resilience of Australian markets as technology and AI continue to evolve."

Industry feedback led to adjustments. A proposed requirement for "real-time" monitoring was changed to "immediately," which ASIC defines as promptly and without delay, after submissions argued that true real-time detection is not always achievable. The manipulation rules were also broadened to address agentic AI directly. Participants must now weigh the effect of an order that creates a false or misleading appearance, even when no person intended that outcome—a direct response to systems that can initiate or adapt trades without explicit human direction at the time.

The Futures Industry Association had urged ASIC toward this kind of clarity and international alignment, telling the regulator during consultation it would "strongly support efforts to strengthen market integrity" through clearer algorithm rules, while pressing for closer consistency with Europe's MiFID II framework. ASIC says the changes bring Australia closer to IOSCO principles, and its parallel consultation on guidance would retire one existing regulatory guide entirely while cutting the volume of related guidance by close to 60 percent. Feedback on that guidance closes November 5, 2026.

A separate 2025 ASIC estimate put algorithmic trading at roughly 85 percent of ASX equities volume and as high as 94 percent in SPI 200 futures. The reforms target order-generating logic specifically, not the client-facing AI layer that platform vendors have been building out.