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ASIC still probing sharp ASX rises

The corporate watchdog says controversial high-powered computer-based trading did not cause the sharp spike in opening stock prices in October.

At the time brokers blamed "black box" high-frequency computer trading behind the spike in the price of major stocks such as ANZ, AMP, Ansell, AGL, Commonwealth Bank and Brambles in the first minute of trading on Thursday, October 18.

Inquiries are still continuing into whether illegal market manipulation occurred and anyone profited but the Australian Securities and Investments Commission (ASIC) has not yet launched a formal investigation.

The growth of "dark pool" automated computer algorithm trading now represents half of all market turnover and worries regulators that it is creating an unfair playing field for "mum and dad" retail investors.

However, ASIC said on Tuesday that it had ruled out a dysfunctional algorithm or high frequency trading strategies as the cause of the spike.

Large volume orders to sell securities in opening trade were placed through a single broker and believed to have been slashed in value from $200 million to $56 million seconds before the market opened.

ASIC said it had interviewed the unnamed broker - which is believed to be UBS - the client and the Australian Securities Exchange (ASX) to obtain information regarding the cause of the trading spike.

Comment was being sought from UBS.

The sharp reduction in sell orders for A-B alphabetical group stocks was followed by a $10 billion lift in the value of the stock market.

It also boosted the price of the October ASX 200 index futures contracts, a derivative product, to above 4,600 which is its highest level since the GFC, with those contracts settled-expiring on that day.

ASIC also released a statement in late November in response to the incident, warning market participants against making or amending large index arbitrage orders - identical buy-sell orders - without adequate notice.

AAP gr/gfr