It has been called the rise of the machines - automated share market trading which allows some investors to make quick profits but also makes volatility worse.http://www.abc.net.au/news/2012-11-21/n ... es/4384636
Algorithmic or automated trading is under the spotlight particularly in the United States.
Earlier in the year investment firm Knight Capital almost went under because of a trading glitch, and in 2010 there was a flash crash on Wall Street where the major share indices tumbled dramatically before rebounding minutes later.
"We want to make sure that there's a level playing field, in terms of regulation, for all users engaging in trading of shares," said Financial Services and Superannuation Minister Bill Shorten.
"What we have seen in recent times, and in America even more so than in Australia, is that it is possible using algorithmic trading programs for large volumes of trades to go through at a very fast rate, this is called high-frequency trading.
"High-frequency trading, at the moment, constitutes about 25 per cent of the trading volume of the ASX and around 50 per cent of Chi-X, but in America it's up to 70 per cent."
The new regulations put in place trading rules to stop big swings in the market.
Dark pools - secretive private markets used by some big investors to make trades in secret away from the transparency of the main markets - will have to be more open about pricing.
Mr Shorten says there will also be automatic kill switches in place by 2014 to stop a computer program that has gone haywire.
"There'll be an automatic control which will cut off connections to exchanges," he said.
"So what'll happen is that brokers will have an automatic control which will cut off connections for exchanges for out-of-control algorithmic trading."