Share market reforms were meant to create competition against dominant stock operator Australian Securities Exchange (ASX) and still protect the interests of investors.

This according to the Australian Securities and Investments Commission (ASIC) as it revealed on Friday its plans to implement new regulations that would break the monopoly of the ASX Group and bolster more competition.

Market analysts said that the latest move by ASIC would encourage further algorithmic trading the proliferation of 'dark pools' in the Australian market, which they stressed could lead to more volatility but lesser transparency in share dealings.

However, ASIC hinted that along with its reform proposals, pre-trade transparency would be a must especially on large-scale trades as the securities regulator stressed that dark pools operators would need to lodge report on the agency on a regular basis.

The regulating body has acknowledged that institutional investors tend to channel their market dealings through dark pools in order not to telegraph their trades as the markets allow anonymous deals and non-traditional exchanges.

Under its proposed changes, ASIC said that traders would be required to report pre-trade orders of less than $20,000 and in order to effectively watch over dork pools dealings, it stressed that "operators of dark pools must periodically report to ASIC on the nature and activity of trading on the pool."

Analysts said that competition offered by dark pools serve as threats for the mainstream market and the impending operation of Nomura's Chi-X in Australia by 2011 reportedly paved the way for ASX to accede to the more than $8 billion takeover proposal tossed by the Singapore Exchange.

ASIC said that the proposed regulations should provide for better market efficiency and innovation yet with minimal risks as Commissioner Shane Tregillis said that "we aim to be ready to implement competition as soon as practicable in 2011, when the necessary framework is in place and the market is ready."

The proposed reforms, according to ASIC, should also discourage questionable trades and stock movements seen on Wall Street in May where specific stocks ended up shedding some 75 percent of their premium.

The regulating body is welcome to all forms of submission and feedback on the reform proposals, which would be accepted by the agency until January 2011.