The Australian Securities Exchange (ASX) is the primary stock exchange in Australia. The ASX began as separate state-based exchanges established as early as 1861. Today trading is all-electronic and the exchange is a public company, listed on the exchange itself.
The Australian Securities Exchange as it is now known resulted from the merger of the Australian Stock Exchange and the Sydney Futures Exchange in December 2006.
The biggest stocks traded on the ASX, in terms of their market capitalisation, include BHP Billiton, Commonwealth Bank of Australia, Telstra Corporation, Rio Tinto, National Australia Bank and Australia and New Zealand Banking Group. As at 31-Dec-2006 the three largest sectors by market cap were financial services (34%), commodities (20%) and listed property trusts (10%).
The major market index is the S&P/ASX 200, an index made up of the top 200 shares in the ASX. This supplanted the previously significant All Ordinaries index, which still runs parallel to the S&P ASX 200. Both are commonly quoted together. Other indices for the bigger stocks are the S&P/ASX 100 and S&P/ASX 50.
The ASX is a public company, and its own shares are traded on the ASX. However, the corporation's charter restricts maximum individual holdings to a small fraction of the company.
While the ASX regulates other listed companies listed on the ASX, it cannot regulate itself, and is regulated by the Australian Securities and Investments Commission (ASIC).
The current managing director Robert Elstone was appointed in July 2006. Prior to the merger of ASX with the Sydney Futures Exchange (SFE), Robert Elstone was the CEO of the SFE.
The Australian Securities Exchange as it is now known resulted from the merger of the Australian Stock Exchange and the Sydney Futures Exchange in December 2006.
The biggest stocks traded on the ASX, in terms of their market capitalisation, include BHP Billiton, Commonwealth Bank of Australia, Telstra Corporation, Rio Tinto, National Australia Bank and Australia and New Zealand Banking Group. As at 31-Dec-2006 the three largest sectors by market cap were financial services (34%), commodities (20%) and listed property trusts (10%).
The major market index is the S&P/ASX 200, an index made up of the top 200 shares in the ASX. This supplanted the previously significant All Ordinaries index, which still runs parallel to the S&P ASX 200. Both are commonly quoted together. Other indices for the bigger stocks are the S&P/ASX 100 and S&P/ASX 50.
The ASX is a public company, and its own shares are traded on the ASX. However, the corporation's charter restricts maximum individual holdings to a small fraction of the company.
While the ASX regulates other listed companies listed on the ASX, it cannot regulate itself, and is regulated by the Australian Securities and Investments Commission (ASIC).
The current managing director Robert Elstone was appointed in July 2006. Prior to the merger of ASX with the Sydney Futures Exchange (SFE), Robert Elstone was the CEO of the SFE.
History:
The exchange began as six separate exchanges established in the state capitals Melbourne (1861), Sydney (1871), Hobart (1882), Brisbane (1884), Adelaide (1887) and Perth (1889).[3] An exchange in Launceston merged into the Hobart exchange too.
The first interstate conference was held in 1903 at Melbourne Cup time. The exchanges then met on an informal basis until 1937 when the Australian Associated Stock Exchanges (AASE) was established, with representatives from each exchange. Over time the AASE established uniform listing rules, broker rules, and commission rates.
Trading was conducted by a call system, where an exchange employee called the names of each company and brokers bid or offered on each. In the 1960s this changed to a post system. Exchange employees called "chalkies" wrote bids and offers in chalk on blackboards continuously, and recorded transactions made.
[edit] Timeline of significant events
In 1969 there was a mining boom, triggered by Poseidon NL discovering nickel in Western Australia. See the Poseidon bubble article.
In 1976 the Australian Options Market was established, trading call options.
In 1980 the separate Melbourne and Sydney stock exchange indices were replaced by Australian Stock Exchange indices.
In 1984 broker's commission rates were deregulated. Commissions have gradually fallen ever since, with today rates as low as 0.12% or 0.1% from discount internet-based brokers.
In 1987, following work begun in 1985, the separate exchanges merged to form the ASX. Also in 1987 the all-electronic SEATS trading system (below) was introduced. It started on just a limited range of stocks, progressively all stocks were moved to it and the trading floors were closed in 1990.
In 1990 the warrants market (below) was established.
In 1993 fixed interest securities were added (see interest rate market below). Also in 1993 the FAST system of accelerated settlement was established, and the following year the CHESS system (see settlement below) was introduced, superseding FAST.
In 1994 the Sydney Futures Exchange announced futures over individual ASX stocks. The ASX responded with Low Exercise Price Option (see below). The SFE went to court,[4][5] claiming LEPOs were futures (certainly their effect is like futures) and therefore the ASX could not offer them. But the court held they were options and so LEPOs were introduced in 1995.
In 1995 stamp duty on share transactions was halved from 0.3% to 0.15%. The ASX had agreed with the Queensland State Government to locate staff in Brisbane in exchange for the stamp duty reduction there, and the other states followed suit so as not to lose brokerage business to Queensland. In 2000 stamp duty was abolished in all states as part of the introduction of the GST.
In 1996 the exchange members (brokers etc) voted to demutualise. The exchange was incorporated as ASX Limited and in 1998 the company was listed on the ASX itself. The ASX arranged with the Australian Securities and Investments Commission to have it enforce listing rules for ASX Limited.
In 1997 a phased transition to the electronic CLICK system for derivatives began.
In 2006 the ASX announced a merger with the Sydney Futures Exchange, the primary derivatives exchange in Australia.
[edit] ASX regulation
ASX and the Australian Securities and Investments Commission (ASIC) "co-regulate" ASX. There are at least 20 examples of co-regulation:
As a licensed market, ASX has legal obligations under Corporations Act 2001 (Cth) (s792A, Part 7.2, Div 3) to run a market which is "fair, orderly and transparent".
ASX must give information to ASIC regarding listed companies: s 792C.
ASX must assist ASIC: s 792D.
ASX must give ASIC access to the market: s 792E.
ASX can "refer" matters to ASIC for further investigation.
ASX must lodge an annual compliance report with ASIC: s 792F.
ASX's Operating Rules are binding in contract: s 793B.
ASIC must be informed of any changes to ASX Operating Rules: s 793D.
ASX's Operating Rules may be disallowed by the Minister (Treasury): s 793E.
ASIC has oversight of all market licensees including ASX.
ASX must notify ASIC of disciplinary actions it takes against participants: s 792B.
ASX's Operating Rules are enforceable by ASIC, the market licensee (ASX), clearing house or "a person aggrieved": s 793C.
The Minister can give directions to ASX: s 794A.
The Minister can call for a report on specified matters regarding ASX: s 794B.
ASIC must complete an annual assessment of ASX's compliance with the law: s794C.
ASIC can give ASX directions to suspend dealings or some other direction to ensure a fair and orderly market: s 794D.
The Minister may impose conditions on ASX's Australian Market Licence: s 796A.
Since ASX is itself a public company listed on ASX, ASIC regulates ASX.
There are limits on the control of ASX (max 15% ownership by one person): Part 7.4, Div 1
ASX Markets Supervision Pty Ltd, a subsidiary of ASX, is responsible for supervising market operations. It was created to address the perceived conflict between ASX’s regulatory and commercial functions.
ASIC can investigate ASX: Part 3, ASIC Act 2001 (Cth)
[edit] SEATS/ITS
Since 2 October 2006, trading of shares, warrants, fixed-interest securities and company-issued options and rights has been conducted on the Click-XT system, also known as the Integrated Trading System (ITS). The Integrated Trading System provides new opportunities for contingent trading and new order types, can process more transactions per second than the older Stock Exchange Automated Trading System (SEATS), and allows multi-order transactions (up to 5 orders per transaction), however it must be realised that as the ITS system is in effect four separate systems 'side by side' contingencies are limited as orders cannot be span separate ITS market 'partitions'.
SEATS was an all-electronic order matching system, based on time and price priority. Two types of orders were accepted,
Market order, to buy or sell at market.
Limit order, to buy at no more than a given price, or to sell at no less than a given price.
Limit orders are the most common. Limit orders not immediately filled are held in the system to be matched against a later order. Such orders remain until a specified expiry date, or until the order is completed, or cancelled. The exchange automatically cancels orders when a stock goes ex-dividend or ex other entitlements.
Unlike the ITS system the SEATS system accepted orders with an Undisclosed Quantity. In SEATS orders with an undisclosed quantity would trade from the undisclosed portion of the order until the whole order was fully filled - without loss of time priority - this was not common international practice and in ITS it was intended to replace this function with the 'Iceberg Order' - an order that automatically refilled the disclosed quantity when exhausted until the intended quantity was traded. As of December 2007 technical and performance problems at the ASX have prevented this implementation, and as such there are no undisclosed orders of any type offered on ITS in the main Australian equity market.
There is a minimum price unit for quotations and trades in the system. This creates a minimum spread of that amount between the limit orders of buyers and sellers sitting in the market. For interest rate market securities (below), except redeemable preference shares, the minimum unit is 0.1 cent. For other securities the unit is based on the share price, [2]
The first interstate conference was held in 1903 at Melbourne Cup time. The exchanges then met on an informal basis until 1937 when the Australian Associated Stock Exchanges (AASE) was established, with representatives from each exchange. Over time the AASE established uniform listing rules, broker rules, and commission rates.
Trading was conducted by a call system, where an exchange employee called the names of each company and brokers bid or offered on each. In the 1960s this changed to a post system. Exchange employees called "chalkies" wrote bids and offers in chalk on blackboards continuously, and recorded transactions made.
[edit] Timeline of significant events
In 1969 there was a mining boom, triggered by Poseidon NL discovering nickel in Western Australia. See the Poseidon bubble article.
In 1976 the Australian Options Market was established, trading call options.
In 1980 the separate Melbourne and Sydney stock exchange indices were replaced by Australian Stock Exchange indices.
In 1984 broker's commission rates were deregulated. Commissions have gradually fallen ever since, with today rates as low as 0.12% or 0.1% from discount internet-based brokers.
In 1987, following work begun in 1985, the separate exchanges merged to form the ASX. Also in 1987 the all-electronic SEATS trading system (below) was introduced. It started on just a limited range of stocks, progressively all stocks were moved to it and the trading floors were closed in 1990.
In 1990 the warrants market (below) was established.
In 1993 fixed interest securities were added (see interest rate market below). Also in 1993 the FAST system of accelerated settlement was established, and the following year the CHESS system (see settlement below) was introduced, superseding FAST.
In 1994 the Sydney Futures Exchange announced futures over individual ASX stocks. The ASX responded with Low Exercise Price Option (see below). The SFE went to court,[4][5] claiming LEPOs were futures (certainly their effect is like futures) and therefore the ASX could not offer them. But the court held they were options and so LEPOs were introduced in 1995.
In 1995 stamp duty on share transactions was halved from 0.3% to 0.15%. The ASX had agreed with the Queensland State Government to locate staff in Brisbane in exchange for the stamp duty reduction there, and the other states followed suit so as not to lose brokerage business to Queensland. In 2000 stamp duty was abolished in all states as part of the introduction of the GST.
In 1996 the exchange members (brokers etc) voted to demutualise. The exchange was incorporated as ASX Limited and in 1998 the company was listed on the ASX itself. The ASX arranged with the Australian Securities and Investments Commission to have it enforce listing rules for ASX Limited.
In 1997 a phased transition to the electronic CLICK system for derivatives began.
In 2006 the ASX announced a merger with the Sydney Futures Exchange, the primary derivatives exchange in Australia.
[edit] ASX regulation
ASX and the Australian Securities and Investments Commission (ASIC) "co-regulate" ASX. There are at least 20 examples of co-regulation:
As a licensed market, ASX has legal obligations under Corporations Act 2001 (Cth) (s792A, Part 7.2, Div 3) to run a market which is "fair, orderly and transparent".
ASX must give information to ASIC regarding listed companies: s 792C.
ASX must assist ASIC: s 792D.
ASX must give ASIC access to the market: s 792E.
ASX can "refer" matters to ASIC for further investigation.
ASX must lodge an annual compliance report with ASIC: s 792F.
ASX's Operating Rules are binding in contract: s 793B.
ASIC must be informed of any changes to ASX Operating Rules: s 793D.
ASX's Operating Rules may be disallowed by the Minister (Treasury): s 793E.
ASIC has oversight of all market licensees including ASX.
ASX must notify ASIC of disciplinary actions it takes against participants: s 792B.
ASX's Operating Rules are enforceable by ASIC, the market licensee (ASX), clearing house or "a person aggrieved": s 793C.
The Minister can give directions to ASX: s 794A.
The Minister can call for a report on specified matters regarding ASX: s 794B.
ASIC must complete an annual assessment of ASX's compliance with the law: s794C.
ASIC can give ASX directions to suspend dealings or some other direction to ensure a fair and orderly market: s 794D.
The Minister may impose conditions on ASX's Australian Market Licence: s 796A.
Since ASX is itself a public company listed on ASX, ASIC regulates ASX.
There are limits on the control of ASX (max 15% ownership by one person): Part 7.4, Div 1
ASX Markets Supervision Pty Ltd, a subsidiary of ASX, is responsible for supervising market operations. It was created to address the perceived conflict between ASX’s regulatory and commercial functions.
ASIC can investigate ASX: Part 3, ASIC Act 2001 (Cth)
[edit] SEATS/ITS
Since 2 October 2006, trading of shares, warrants, fixed-interest securities and company-issued options and rights has been conducted on the Click-XT system, also known as the Integrated Trading System (ITS). The Integrated Trading System provides new opportunities for contingent trading and new order types, can process more transactions per second than the older Stock Exchange Automated Trading System (SEATS), and allows multi-order transactions (up to 5 orders per transaction), however it must be realised that as the ITS system is in effect four separate systems 'side by side' contingencies are limited as orders cannot be span separate ITS market 'partitions'.
SEATS was an all-electronic order matching system, based on time and price priority. Two types of orders were accepted,
Market order, to buy or sell at market.
Limit order, to buy at no more than a given price, or to sell at no less than a given price.
Limit orders are the most common. Limit orders not immediately filled are held in the system to be matched against a later order. Such orders remain until a specified expiry date, or until the order is completed, or cancelled. The exchange automatically cancels orders when a stock goes ex-dividend or ex other entitlements.
Unlike the ITS system the SEATS system accepted orders with an Undisclosed Quantity. In SEATS orders with an undisclosed quantity would trade from the undisclosed portion of the order until the whole order was fully filled - without loss of time priority - this was not common international practice and in ITS it was intended to replace this function with the 'Iceberg Order' - an order that automatically refilled the disclosed quantity when exhausted until the intended quantity was traded. As of December 2007 technical and performance problems at the ASX have prevented this implementation, and as such there are no undisclosed orders of any type offered on ITS in the main Australian equity market.
There is a minimum price unit for quotations and trades in the system. This creates a minimum spread of that amount between the limit orders of buyers and sellers sitting in the market. For interest rate market securities (below), except redeemable preference shares, the minimum unit is 0.1 cent. For other securities the unit is based on the share price, [2]
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