ASIC addresses the AI revolution: Changes to the Market Integrity Rules to address algorithms and AI 

What you need to know

• Following its consultation last year, ASIC has now released the ASIC Market Integrity Rules (Securities Markets) Amendment Instrument 2026/574 and the ASIC Market Integrity Rules (Futures Markets) Amendment Instrument 2026/575 (together, the Amendment Instruments), which amend the ASIC Market Integrity Rules (Securities Markets) 2017 (Securities MIRs) and the ASIC Market Integrity Rules (Futures Markets) 2017 (Futures MIRs) (together, the MIRs).
• The amendments are generally consistent with those proposed in Consultation Paper 386: Proposed amendments to the ASIC market integrity rules: Trading systems and automated trading (CP 386), with a key change being to require adequate monitoring arrangements that enable a participant to "immediately" identify trading messages that may interfere with the market (a walk-back from the "real time" monitoring previously proposed).
• In summary, the Amendment Instruments:
  • Introduce a new definition of 'Trading Algorithm' and impose new obligations in respect of their development, approval, testing, deployment and monitoring;
  • Introduce a new technology-neutral definition of 'Trading System' which will apply irrespective of how participants use trading messages;
  • Introduce a requirement to have adequate post-trade surveillance arrangements to enable participants to identify promptly and without delay any potentially manipulative trading;
  • Amend the false and misleading appearance rules to consider the effect of a bid, offer or deal in any financial product and clarify that these rules extend to conduct by any person, including when a participant's client is acting on behalf of another person, and to require consideration of the effect of an order, including where generated by agentic AI systems.
• The changes are intended to reflect the increasing reliance on automated trading, including algorithmic trading and the use of artificial intelligence (AI) and machine learning, as well as better align the Futures MIRs with existing obligations under the Securities MIRs.
• The amendments will take effect 18 months after the day the amendments are registered (i.e. 15 March 2028).

What you need to do

• Consider the amendments to the MIRs and their practical implications on your business.
• Stand up a program of work to map out obligations and identify gaps in systems and processes to address the revised MIRs and develop new frameworks to support certification requirements and more onerous post-trade surveillance obligations.

Changes from CP 386

The Amendment Instruments include the following additional changes to the amendments proposed in CP 386 in response to industry feedback:

1. In relation to monitoring and post-trade surveillance, ASIC has removed the reference to ‘real-time’. Instead, a trading participant should have adequate monitoring arrangements that enable it to immediately (which ASIC considers to mean promptly and without delay) identify trading messages that are likely to, or have interfered with the efficiency or integrity of a market or the proper functioning of a trading platform;
2. To clarify that although a review of trading systems must be done on an annual basis, testing can be undertaken as necessary to enable compliance with Rule 5.5.2 and Part 5.6;
3. To clarify that the material change review of trading systems involves the assessment of controls, arrangements and resources related to or impacted by the material change; and
4. Amendments to the market manipulation prohibition to require a market participant to consider the effect of a bid, offer or deal in any financial product.

Obligations relating to trading algorithms

Consistent with its proposal under CP 386, ASIC has introduced a new definition of 'Trading Algorithm', which is "a computer algorithm which automatically determines with limited or no human intervention, one or more parameters of an Order such as whether to initiate an Order, the timing, price or quantity of the Order or how to manage the Order after its submission, but does not include systems or processes used only:

1. for the purpose of routing Orders to one or more Trading Platforms;
2. for the submission of Orders involving no determination of any Order parameters;
3. for producing confirmations of Orders; or
4. for post-trade processing of executed transactions."

This definition therefore captures algorithms that are responsible for determining the substantive parameters of an order, rather than those simply used to submit and manage orders.

The Amending Instruments also introduce a number of new rules in respect of the use of Trading Algorithms, including:

• Requiring participants to have appropriate controls and governance arrangements (including written procedures) for the development, testing, approval, deployment and monitoring of all trading algorithms used by the trading participant or that the trading participant makes available to a client;
• Taking reasonable steps to test that the trading algorithm will not interfere with the efficiency and integrity of a market, any crossing system operated by the trading participant or the proper functioning of a trading platform;
• Testing any trading algorithms before use for the first time and before implementing a material change to an algorithm;
• Ensuring that the trading algorithms are developed and tested by persons who are suitably qualified to do so;
• Extending existing obligations in respect of "kill switch" controls to Trading Algorithms, so that participants can immediately suspend or limit the operation of one or more specific trading algorithms without suspending the entire trading system; and
• Participants must maintain records demonstrating compliance with trading algorithm obligations for a period of seven years.

Technology-neutral definition of "Trading System"

ASIC has implemented its proposal to introduce a new technology-neutral definition of 'Trading System', which is defined broadly as "a system that registers Trading Messages for submission into a Trading Platform". This means that the obligations under the MIRs will apply regardless of how trading messages are submitted into a trading platform.

Flowing on from this, ASIC has also removed the longstanding definition of a Designated Trading Representative (DTR) from the MIRs. Rather than continue to mandate the role of a DTR, a trading participant will need to satisfy itself that any representative authorised to submit trading messages into the trading platform is suitably qualified and experienced to perform that function.
The Amendment Instruments introduce the following requirements in respect of trading systems:

• Review and test documentation and systems prior to using a trading system in relation to a market;
• Providing an initial certification to ASIC containing details of the trading system and receiving a confirmation from ASIC before using the trading system in relation to a market;
• Reviewing any material changes to a Trading System, including assessing the controls, arrangements and resources related to or impacted by the material change, before introducing such a material change; and
• Conducting an annual review of the trading system.

The certification process has been simplified: the previous requirement for two directors to sign the initial certification has been replaced with a requirement for at least one responsible officer to confirm that the certification is accurate.

Trade monitoring

The Amendment Instruments also require trading participants to have in place:

• Adequate monitoring systems to immediately identify trading messages that are likely to interfere or have interfered with the efficiency or integrity of a market, or the proper functioning of a trading platform; and
• Adequate post-trade surveillance arrangements that enable a participant to identify as soon as possible a trading message that may create a false or misleading appearance.

As noted above, ASIC has amended its previous proposal in CP 386 requiring participants to have adequate monitoring systems to monitor trading messages in "real-time" in response to submissions that real-time detection is not possible in all circumstances. The reference to "real time" has now been replaced with "immediately", which ASIC considers to mean promptly and without delay.

Clarifying the manipulative trading rules

The Amendment Instruments clarify that the prohibition on placing potentially manipulative orders extends to a bid, offer or dealing made on behalf of or on account of any other person, including where that person is acting on behalf of a client. This is intended to address the circumstance where there may be a chain of intermediaries or underlying clients.

The amendments also make clear that a market participant is required to consider both the intention and the effect of any potentially manipulative trading. This is intended to address the use of agentic AI in trading. Agentic AI systems may initiate, adapt or optimise trading activity in ways not directly specified by a person at the time an order is generated, and a market participant must consider the effect of an order even where no person intended to create a false or misleading appearance.

The manipulative trading rules have also been updated to expressly acknowledge that the list of matters that a participant must consider is non-exhaustive.

Specific amendments to Futures MIRs

The relevant Amendment Instrument for the Futures MIRs introduces a number of new requirements into the Futures MIRs, to align with existing obligations under the Securities MIRs, including requirements that a participant must:

• not do anything that results in a market for a contract not being both fair and orderly;
• have and maintain the necessary organisational and technical resources to ensure that trading messages do not interfere with market efficiency or integrity;
• set appropriate limits on client and house accounts; and
• have order records covering client orders, proprietary orders, error trades, accounting records, timing and retention.

ASIC has also indicated that it intends to clarify in future guidance that, for compliance with the new organisational and technical resources and trading system controls requirements, an authorised client under sponsored direct market access arrangements would need to be a principal trader.

If you would like to discuss what the changes mean, please feel free to contact us.

Authors: Jonathan Gordon, Partner; Corey McHattan, Partner; Nicky Thiyavutikan, Senior Associate and Vivien Lin, Lawyer.