Stock trading bots are computer programmes that use artificial intelligence to trade stocks on behalf of their owners. In most cases, these bots are legal; however, using them may be considered illegal in some instances and it is vital to identify them.
In Australia, stock trading bots are regulated by the Australian Securities and Investments Commission (ASIC). ASIC’s regulations state that the company providing the bot you use for trading must be registered with the commission. Additionally, the bot must comply with all applicable laws and regulations.
When is a stock trading bot considered illegal?
If the bot is not registered with ASIC
The company providing the stock trading bots must register them with ASIC to be legal. If a bot is not registered, it is considered illegal because ASIC controls the use of bots and their compliance with regulations.
If the bot does not comply with all applicable laws and regulations
All bots must comply with relevant laws and regulations, including, but not limited to, the Corporations Act 2001 and the National Consumer Credit Protection Act 2009. If a bot does not comply with these laws, it is considered illegal.
If the bot is used for insider trading
Insider trading is when a person uses information that is not publicly available to make trades. It is illegal in Australia and using a stock trading bot would be considered illegal.
If the bot is used to manipulate the market
Manipulating the market is when a person or group tries to change the security price artificially. It is done to make a profit at the expense of others, which is illegal in Australia, and using a stock trading bot to do so would therefore be considered illegal.
If the bot is used for fraud
Fraud is when someone uses deception to obtain money or property. Fraudsters create fake accounts, manipulate data, or use false information. Using a stock trading bot to commit fraud is considered illegal in Australia.
If the bot is used for money laundering
Money laundering is when people try to hide the origins of illegally obtained money. It could involve moving money around between different accounts or making trades that are not legitimate. If a stock trading bot is used for money laundering, it is considered illegal in Australia.
If the bot is used for terrorist financing
Terrorist financing is when people use funds to support terrorist organisations. They do this by providing financial assistance or making trades that benefit terrorist groups. Using a stock trading bot for terrorist financing would be illegal in Australia.
If the bot is used to commit a crime
Many different crimes could be committed using a stock trading bot. These crimes include but are not limited to fraud, money laundering, and insider trading. If a bot is used to commit any of these crimes, it would be considered illegal in Australia.
What are the advantages of using a stock trading bot?
You can trade 24 hours a day
Stock trading bots never sleep and can trade 24 hours a day, meaning you can make money even while sleeping.
You can trade multiple stocks at once
Stock trading bots can trade multiple stocks simultaneously, which allows you to diversify your portfolio and reduce your risk.
You can automate your trades
Stock trading bots can automate your trades, meaning you don’t have to monitor the market constantly and instead focus on other things.
You don’t have to pay commissions
Stock trading bots don’t have to pay commissions, meaning you can keep more of the profits from your trades.
You can backtest your strategies
Stock trading bots can backtest your strategies, meaning you can test how successful your strategies would have been in the past.
What are the disadvantages of using a stock trading bot?
They can be expensive
Stock trading bots can be expensive, meaning you need to have a large amount of money to invest in making a profit.
They are not perfect
Stock trading bots are not perfect and will make mistakes, so you could lose money if the bot makes a mistake.
It would be best to have a good strategy
For a stock trading bot to be effective, you need to have a good strategy, and therefore, you need to spend time developing and testing your strategy.
You can read this article for more information on stock trading.