Financial services and superannuation minister Bill Shorten has released some alternative approaches to reforming licensing regimes.
The paper, 'Australia's Financial Market Licensing regime: Addressing Market Evolution', discusses two main options for creating a new approach to finance licensing for retail investors.
"The current licence approach was based around large public exchanges, like the ASX," Mr Shorten said.
"Australia's licence regime should be able to accommodate these new market developments such as dark pools, and should be flexible enough to properly regulate any additional market types that may emerge in the future."
The first option provided in the paper would create flexibility in the Corporations Act by giving space to tailor the licence obligations for each market type.
The second would create multiple licence classes, with dark pools licensed in a different category to from public exchanges and with their own obligations.
"The government is committed to introducing appropriate rules to govern high frequency trading," Mr Shorten said.
"We are looking to ensure that those rules can be enforced in an effective and timely way, in order to protect the markets and investors."
The paper follows an announcement by Mr Shorten last week that the government will introduce a package of market integrity rules to better protect investors within Australia's financial markets.
The package will provide for direct control over trading algorithms, including kill switches and new extreme trading rules in case of large price movements.
New rules also include a requirement that dark pools offer meaningful price improvement over the lit market with exemptions for block trades and additional data reporting requirements to assist ASIC in performing market surveillance.
The period for written submissions in response to the options paper closes on 1 February 2013.
