New Australian alternative trading rules All high-frequency traders operating in Australia will be required to install "kill switches" by 2014 and "dark pools" will have to offer "meaningful price improvement" by the middle of next year under new rules unveiled by the ruling Labor government on Tuesday. The sweeping reforms of the Australian stock market are a further sign that Asian regulators and governments are determined to avoid the mistakes made in the US and European markets. In these regions unfettered development of rapid automated trading and a shift from transparent public exchanges to venues where investors can trade blocks of shares anonymously has led to a fundamental reassessment of equity markets. The challenge facing international regulators was underscored by a report from the London-based CFA Institute published this week. It showed trading of US equities on "dark pools" now accounts for nearly a third of total market volumes. Alternative trading venues have grown popular with institutional investors who do not like seeing their orders sliced by computerised trading. But regulators fear further fragmentation could dent the integrity of public markets. Bill Shorten, the minister for Financial Services and Superannuation, said the new Australian rules would help reduce the risk of "market volatility" from computerised trading and provide "increased protection" for retail investors and others trading in dark pools. "The government is acting to ensure that investors have increased confidence in Australia's financial markets," he said. In addition to the new rules on dark pools and HFT, the Australian government is also introducing fresh measures to guard against market volatility. Stock market operators, the Australian Securities Exchange and Chi-X, will have to put in place systems to halt trading in stocks where there has been an extreme price movement. There will also be new data reporting requirements on operators from 2013. The ASX welcomed the new rules, which it said were "sensible." "ASX believes the requirement for "meaningful price improvement" is a good first step to dealing with the risks of dark execution and market fragmentation," it said. Mr Shorten said the Australian Securities and Investments Commission was also considering introducing a minimum order threshold for dark pool trading and imposing minimum trade sizes on algorithmic traders. ASIC will make a recommendation on these options in March. Elmer Funke Kupper, the chief executive of the ASX, has called for a proposed threshold of A$25,000 on dark pool trading, while ASIC has previously raised the idea of a A$50,000 level. We would be happy with either, recognising that the number cannot be zero. All share trades under the minimum threshold would be directed to the public, "lit" market to which all investors have equal access," said Mr Funke Kupper.