High-Frequency Trading in Australia: 2025 Trends & Impact

High-frequency trading (HFT) is no longer just a Wall Street buzzword. In 2025, HFT has cemented itself as a key player on the Australian Securities Exchange (ASX), influencing everything from market liquidity to price discovery. But what exactly is HFT, and how is it shaping the landscape for both institutional and retail investors down under?

What is High-Frequency Trading?

At its core, high-frequency trading leverages cutting-edge algorithms and lightning-fast computer systems to execute thousands of trades per second. These algorithms scour the market for fleeting opportunities—arbitrage, tiny price discrepancies, or sudden surges in volume—executing orders at speeds no human could match.

• Speed is king: HFT firms invest heavily in low-latency infrastructure, often locating their servers physically close to the ASX to shave off microseconds.

• Volume over value: Profits per trade are minuscule, but the sheer number of trades adds up.

• Automation: Human intervention is rare; sophisticated algorithms run the show.

HFT has grown rapidly in Australia over the last decade, and by 2025, it’s estimated to account for 30-40% of all trading volume on the ASX, mirroring trends seen in the US and Europe.

2025: Regulation and Market Impact

Regulators in Australia have grappled with HFT’s dual nature: it can enhance liquidity and tighten spreads, but it also raises concerns about volatility, fairness, and systemic risk. In late 2024, ASIC rolled out new surveillance tools and reporting requirements specifically targeting algorithmic trading. These updates require:

• Real-time disclosure of algorithmic strategies for large-volume traders

• Stricter limits on order-to-trade ratios to curb excessive ‘quote stuffing’

• Mandatory kill-switch mechanisms to halt runaway algorithms

The ASX also introduced a ‘speed bump’ on certain order types, introducing a deliberate delay of 1-2 milliseconds. This aims to level the playing field for traditional traders who can’t compete with HFT speeds, and echoes similar interventions on the TSX and NYSE.

While these moves were initially met with resistance from HFT firms, early data from Q1 2025 shows a modest reduction in intraday volatility and fewer ‘flash crash’-like events. However, critics argue that too much regulation could reduce overall market liquidity, raising trading costs for everyone.

The Pros and Cons for Everyday Investors

For everyday investors, HFT is a double-edged sword. On one hand, it can improve market efficiency, narrow bid-ask spreads, and make it easier to buy and sell shares at fair prices. On the other, there are risks:

• Market fairness: HFT firms with deep pockets and powerful tech can exploit price information before others can react.

• Increased volatility: During turbulent periods, HFT algorithms may withdraw liquidity, amplifying price swings.

• Hidden costs: Retail investors using market orders can be exposed to ‘slippage’ when HFT algorithms react faster than brokers can process trades.

Consider the infamous 2022 ‘mini flash crash’ on the ASX, where an algorithmic error caused several blue-chip stocks to plunge momentarily. While the market recovered within seconds, some investors faced outsized losses or missed out on normal trade execution. Since then, both brokers and regulators have upped their game, with most retail platforms now offering more transparency around order routing and execution quality.

Where to Next? The Future of HFT in Australia

With global competition heating up, some Australian HFT firms are expanding into Asian markets, leveraging their expertise in latency-sensitive trading. Locally, advancements in quantum computing and AI-driven algorithms are poised to further reshape the landscape.

For investors, the key takeaway is awareness: understand how your trades are executed, ask your broker about their approach to HFT, and consider limit orders instead of market orders when possible. As the ASX continues to evolve, staying informed is your best defence—and your best opportunity.