High frequency trading and dark pools are the biggest issues of contention in the Australian Securities and Investment Commission's extended consultation process on market integrity rules, according to one industry expert.

Australian Securities and Investment Commission's (ASIC) announced an extension of submission deadlines last month from January 20 to February 20 following the large volume of industry response to the proposed rules on high frequency trading, volatility controls, pre-trade transparency (dark pools) and best execution.

Steve Grob, director of group strategy at trading technology provider Fidessa says the regulator is doing a good job to ensure they don't make the same mistakes as others have, but that they need an ease in focus.

"I think ASIC may be worrying a bit too much about HFT, particularly given the challenges around defining what it really is," Grob said.

"When you start playing around with market structure you open yourself up to the law of unintended consequences, so in the market consultation process, ASIC have effectively said they'll have a number of goes at this. ASIC has done a good job of learning from Europe and implementing a healthy timeline around the consultation."

While the ASIC market integrity regime backs convention on dark pools stipulating they can only be used if they offer a price edge and not purely to keep volume and pricing from open markets, HFT seems to be on the rise without the regulator truly understanding what it is.

High frequency trades, completed in milliseconds were estimated to account for between 15 and 25% of turnover at October last year - that was before Chi-X opened for business with accompanying modernisations in trading systems. Despite this, ASIC documentation rather than clearly defining HFT, merely states that the term is difficult to define with any certainty.

Getting market integrity rules right and having regulators on-board with the process is vital in the current climate of cross-border exchange mergers, according to Grob, referencing the failed attempt last year between SGX and the ASX.

"It was regulators that introduced the multi-market structures that broke up the monopolies of the national exchanges, so it's not surprising that their reaction has been to try and grow though mergers and acquisitions. Yet three high-profile mergers including Deutsche Boerse/NYSE Euronext have been blocked by regulators on competition grounds and national politics," said Grob.