Share Market Introduction

The Australian share market is known as the Australian Securities Exchange and is the primary stock exchange in Australia. The exchange began as six separate exchanges established in the various state capitals of Melbourne, Sydney, Hobart, Brisbane, Adelaide, and Perth, as far back as 1861. 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 employee of the exchange 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 giant blackboards continuously, and recorded transactions made.

Today trading is completely electronic and the exchange is a public company, listed on the exchange itself.

The Australian Securities Exchange as it is currently known is the result of a merger between the Australian Stock Exchange and the Sydney Futures Exchange in December of 2006, it then became the 9th largest stock exchange in the world.

The largest stocks traded on the ASX, in terms of their market capitalization, include BHP Billiton (BHP), Commonwealth Bank of Australia (CBA), Telstra Corporation (TLS), Rio Tinto (RIO), National Australia Bank (NAB), and Australia and New Zealand Banking Group (ANZ). As of December 31st 2006 the three largest sectors by market capitalization were financial services (34%), commodities (20%), and listed property trusts (10%).

The major market index is the S&P/ASX 200, this index consists of the top 200 shares in the ASX. The All Ordinaries Index is the other significant index in the ASX and runs parallel to the S&P ASX 200. Both indicies are commonly quoted together. Other important indicies include the S&P/ ASX 100 and the S&P/ASX 50.

The ASX is a public company, and its own shares are traded on the ASX. However, the company’s charter limits maximum individual holdings to a small fraction of the company.

While the ASX regulates other listed companies on the ASX, it cannot regulate itself, thus it is regulated by the Australian Securities and Investments Commission (ASIC). The current managing director is Robert Elstone and he was appointed in July of 2006. Before the merger of ASX with the Sydney Futures Exchange (SFE), Elstone was the CEO of the SFE.

The ASX has a pre-market session that lasts from 7:00am to 10:00a AEST and a normal trading session from 10:00am to 4:00pm AEST.

The market opens alphabetically in single-price actions, phased over the first 10 minutes, with a small random time built in to prevent participants from predicting the exact time of the first trades. There is also a single-price auction between 4:10pm and 4:12pm in order to set the daily closing prices. There were 2014 stocks listed on the ASX as of March 30 2007, with a total market capitalization of A$1.39 trillion (US$1.098 trillion). At the end of 2004 the ASX was the 8th largest equity market in the world (on free float basis), comprising around 2.2% of the MSCI World index. Market turnover during 2004 was $A779 billion. Retail investors account for about 20% of market turnover, market ownership breaks down as 30% institutional, 40% foreign, and 30% retail.