ASIC Releases Consultation Paper on PFOF Amendments

The Australian Securities and Investments Commission (ASIC) has released a consultation paper on payment-for-order-flow (PFOF) rule amendments, which are proposed to avoid the emergence of PFOF arrangements in Australia.

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PFOF is an arrangement where by one entity buys client order flow from another entity, in exchange for a payment or other incentive. It is currently prohibited among market participants.

Payment for order flow is not prevalent in the Australian equity market, however ASIC has observed continued growth of payment for order flow in other markets (mostly the US). There is also increasing scrutiny of payment for order flow by other regulators.

“Payment-for-order-flow arrangements create conflicts of interest that can lead to poor client outcomes. It can also negatively impact market liquidity and pricing. In our view, these harms outweigh the benefits,”the Australian regulator stated.

The consultation period will end on 3 November 2021, providing respondents with an extended period in recognition of the pandemic shutdowns in which to respond to ASIC’s proposals.

Last week, the ASIC has issued a notice, urging Australians to be wary of investing in crypto-asset related financial products​ through unlicensed entities.