Australia’s Corporate Watchdog Sets New Safeguards on AI Trading

Australia’s securities regulator is strengthening safeguards for automated and artificial intelligence-enabled trading to align its rules with international standards.

The reforms will require market participants to test, monitor and govern trading systems and algorithms as markets evolve and AI adoption increases, the Australian Securities and Investments Commission said in a statement Thursday. The amendments follow extensive industry consultation and the changes will take effect in 2028.

The safeguards are part of a wave of regulatory changes globally as authorities seek to keep pace with the growing use of AI and automation in financial markets. The changes may shape how firms deploy the technology and how regulators oversee its use in the years ahead.

“Trading on Australia’s markets is now almost entirely automated, and the adoption of AI is increasing,” said ASIC Commissioner Simone Constant. “While these technologies can improve efficiency, trading algorithms can also behave in ways that are opaque, unpredictable and potentially manipulative.”

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After considering industry feedback, ASIC extended the transition period to 18 months, giving firms additional time to implement the reforms while maintaining their market-integrity objectives. The rules will apply to risks arising from all trading algorithms, including those enabled by AI and machine learning, the statement said.

ASIC warned last year that financial markets may be particularly vulnerable to risks from trading algorithms and AI, proposing “kill switches” to immediately suspend aberrant trading activity.