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June 17, 2008
Australian Stock Market
Australian Stock Market – Australian Securities Exchange (ASX)

The Australian stock market, known as the Australian Securities Exchange, is the primary stock exchange in Australia. It is known as the ASX, is entirely electronic, and resulted from a merger of the Australian Stock Exchange and the Sydney Futures Exchange in 2006. The ASX is actually a public company listed, with its own shares traded on itself! The ASX cannot regulate itself obviously since its job is to regulate other listed companies on its exchange so it is regulated by the Australian Securities and Investment Commission (ASIC). There are other stock exchanges in the Australian stock market however the ASX is the main exchange. It started off as far back as 1861 and the average daily turn over in dollars is around $4 billion with about 122,000 trades placed each day.

Before the ASX, the Australian stock market consisted of six different exchanges that merged in 1987! Basically, each major city had its own stock exchange with the first being the exchange in Melbourne in 1861. The trading platform used is called the SEATS (Stock Exchange Automated Trading System) and it has extremely low brokerage fees. The ASX is the 8th largest exchange and has had three different methods of trading stocks. The first was obviously verbal auction, followed by the chalk system on the Australian stock market in 1869. When one man could no longer verbally call out the names of stock for bidding, the Aussies moved to scribbling buy and sell stock orders on chalkboards. Upon its implementation of SEATS the trading floors were actually closed.

The Australian stock market (ASX) is a multi-asset class vertically integrated exchange group and offers a wide array of products and services. It operates two trading, clearing and settlement platforms with one for equity and one for a suite of interest rate, commodity futures, options futures, equity index and Contracts for Difference (CFD). The first is traded on an integrated trading platform between 10:00 a.m. and 4:00 p.m. and the other is traded on a globally distributed 24-hour platform.

The Australian stock market works just like the NYSE or American Stock Exchange in that it has full-services and discount brokers. The full-services brokers act just the same as and are called full-services brokers however the discount brokers are referred to as non-advisory brokers in this stock market. They perform the same services and their online discount brokers are typically internet and/or telephone based.

An interesting feature of the ASX is the LEPO. LEPO stands for low exercise price options and they work like futures contracts in that it is a call option with a low exercise price of $0.01 and a contract size of 1000 shares to be delivered on exercise. Since they are European style they cannot be exercised until expiration and the premium is practically the whole share price. The trader can only post margin and cannot post the full price, and can take a long or short position.

There is a lot of additional information regarding the Australian stock market that this article does not address. Continue to research other markets as seasoned traders often do in attempts to expand their knowledge base.

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posted by Stephen W. Bigalow at 5:29 PM

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