Blue-chip spike sparks high-frequency trading probe

Brokers believe a computer program played a key role in Wednesday's sudden surge in the share prices of more than eight companies including ANZ Bank, Commonwealth Bank, AGL, Bank of Queensland, Ansell and Aristocrat.

The increase, which also forced up options on the ASX 200 index, occurred because several buy orders were withdrawn just six seconds before share trades were about to take place.

The Australian Securities and Investments Commission has launched an investigation into whether market manipulation was behind the spike, amid fears some traders profited from the surge.

Meanwhile, the peak body representing shareholders said yesterday the incident underlined the need for restrictions on high-frequency trading. The chief executive of the Australian Shareholders' Association, Vas Kolesnikoff, said regardless of whether the increase was the result of a technology glitch or something more sinister such as market manipulation, it highlighted the threat that technology posed to market integrity.

Mr Kolesnikoff said some retail investors were already selling down their share portfolios due to fears that high-speed traders had an unfair advantage and called on the Financial Services Minister, Bill Shorten, to intervene.

"He's got to start considering why the market exists, because all this is chipping into everybody's superannuation savings," he said.

A spokesman for Mr Shorten said Treasury and the Australian Prudential Regulation Authority were investigating high-speed trading, and they were expected to report on their findings by the end of the year.

The deputy chair of ASIC, Belinda Gibson, said on Thursday night she did not think a high-speed trading algorithm drove the event.

However, brokers and other market participants think a computer program must have been used to make the changes to the sell orders in a matter of seconds.