What is the Australian Securities Exchange?
The Australian Securities Exchange (ASX) is the primary securities trading exchange in Australia. The exchange offers a wide array of services including securities listings, trading, clearing and settlement across many different asset classes.
ASX has listings for companies and issuers across multiple geographies and industry sectors. These companies and issuers have a market capitalization in excess of $1.5 trillion. ASX also runs the largest interest rate derivatives market in Asia and one of the largest in the world.
ASX’s diverse customer base includes the more than 2,200 companies and issuers it lists for trading, 180 market participants in the cash equities and derivatives markets and four exchanges for clearing and settlement. These customers, in turn, serve corporations, pensions, fund managers and millions of retail traders.
As one of the world’s leading financial exchanges, ASX plays an important role in global commodities markets.
History of ASX
In 1987, the Australian Parliament drafted legislation that combined six independent state-based stock exchanges in the country. Each of these six exchanges traced its roots to the 1800s. The combination of these entities led to the formation of the Australian Stock Exchange.
In 2006, the Australian Stock Exchange merged with the Sydney Futures Exchange and began operating under the name Australian Securities Exchange.
In 2010, the Australian Securities Exchange created a new corporate structure to better position itself in world financial markets. The new entity became known as the ASX Group.
Who Governs ASX?
ASX Group is the brand name utilized by the publicly traded company ASX Limited (ASX: ASX). ASX Limited is governed by a management team and board of directors with decades of experience in financial markets.
|Rick Holliday-Smith||Independent Chairman||March 2012||Mr. Holliday-Smith has also been a director of ASX since July 2006. He was previously Chairman of SFE Corporation Limited (Shanghai Futures Exchange) from 1998 until 2006.|
|Dominic Stevens||CEO||August 2016||Mr. Stevens was an independent non-executive director of ASX from December 2013 until his appointment as CEO.|
|Yasmin Allen||Independent Director||February 2015||Ms. Allen serves as a member of the Audit and Risk Committee.|
|Melinda Conrad||Independent Director||August 2016||Ms. Conrad has over 20 years of experience in business strategy and marketing.|
|Dr. Ken Henry AC||Independent Director||February 2013||Dr. Henry serves as a member of the Audit and Risk Committee.|
|Mr. Peter Marriott||Independent Director||July 2009||Mr. Marriott serves as Chair of the Audit and Risk Committee.|
|Robert Priestley||Independent Director||May 2017||Mr. Priestley was formerly the CEO of J.P. Morgan Australia & New Zealand.|
|Heather Ridout AO||Independent Director||August 2012||Mrs. Ridout is a director of ASX Compliance, Chair of the Remuneration Committee and a member of the Nomination Committee.|
|Damian Roche||Independent Director||August 2014||Mr. Roche is a director of ASX Compliance and ASX Clear (Futures) Pty Limited and Austraclear Limited, the ASX Group clearing and settlement licensees for Australia’s derivatives, OTC and debt markets and their intermediate holding companies.|
|Peter Warne||Independent Director||July 2006||Mr. Warne is a member of the Audit and Risk, Nomination and Remuneration Committees. He was previously a director of SFE Corporation Limited from 2000 to 2006.|
Images sourced from: https://www.asx.com.au/about/board-and-management.htm
How is ASX Regulated?
Two independent Australian government agencies – the Australian Securities and Investments Commission (ASIC) and the Reserve Bank of Australia (RBA) – oversee the securities industry in Australia.
These government regulators have broad powers to enforce the laws and regulations that govern financial markets in Australia, including the operation of ASX.
In addition, ASX has its own internal compliance group that ensures that the exchange operates within the procedures established by the entities that regulate it and the clearing and settlement facilities it operates.
ASX operates an Executive Office, which has authority to bring enforcement actions against market participants that violate the exchange’s rules and regulations. ASX has the power to administer its own enforcement actions or, in more serious cases, refer the matter to ASIC for further investigation.
What Products Does ASX Trade?
ASX offers customers access to trading twelve different categories of products:
|Category||Products||Trading Platform||Market Facts|
|Shares||ASX shares fall into one of three categories:||ASX Trade|
|Indices||ASX trades six broad categories of indices:||ASX Trade|
|Bonds||ASX quotes a variety of bond types:||ASX Trade|
|Hybrid Securities||ASX trades three types of hybrid securities:||ASX Trade||Hybrid securities have both debt and equity features.|
|ETPs||Exchange traded products (ETPs) fall into six categories:||ASX Trade||Exchange-traded products are financial products traded on an exchange that invest in or give exposure to securities (shares) or other assets such as commodities.|
|Managed Funds||ASX offers four types of listed managed funds:||ASX Trade||These products pool the funds of individual investors and are managed professionally.|
|Warrants||Warrants are a type of derivative that fall into one of two categories:||ASX Trade||Leading investment banks in the world and Australia issue warrants traded on the ASX market.|
|Options||ASX offers equity and index options.||NTP (ASX 24 Market)||Traders can use options for bullish, bearish or neutral trading strategies.|
|Index Derivatives||ASX offers futures on stock, REIT, sector and volatility indices.||NTP (ASX 24 Market)||Index derivatives provide a leveraged way to trade indices 21 hours and 50 minutes each day / 6 days a week.|
|Interest Rate Derivatives||ASX offers six types of interest rate futures:||NTP (ASX 24 Market)||The ASX interest rate futures products are leveraged instruments that allow investors and traders to manage exposure to short and long term Australian and New Zealand interest rates.|
|Grain Derivatives||ASX trades five grain commodity futures and options:||NTP (ASX 24 Market)||ASX grain futures stipulate physical delivery.|
|Energy Derivatives||ASX trades three energy commodity futures and options:||NTP (ASX 24 Market)||ASX offers base load and peak load futures for electricity and average rate options on electricity futures.|
Does ASX Offer Contracts For Difference Trading?
ASX has not offered trading in contracts for difference (CFDs) since June 2014.
CFDs are a derivative instrument that offers retail traders a different way to invest in financial markets. CFDs allow traders to use leverage to bet on the price of financial assets. The value of a CFD is the difference between the price of a financial instrument at the time of its purchase and its current price.
Some regulated brokers worldwide offer CFDs on shares, commodities, indices, forex and other financial assets. Customers deposit funds with the broker, which serve as margin. The advantage of CFDs is that trader can have exposure to financial assets without having to purchase shares, ETFs, futures or options.
How Does the ASX Conduct Trading?
ASX operates two trading platforms:
This platform is a cash market trading platform modeled after one of the popular NASDAQ platforms. The platform incorporates three services that help facilitate an orderly marketplace:
- TradeMatch: This is the order book that gives traders the ability to enter various order types such as limit and market orders.
- Centre Point: This is Australia’s largest anonymous mid-point matching system and provides traders with the ability to enter more complex and advanced order types.
- Trade Sweep: This technology enables traders to access the features of both TradeMatch and Centre Point in the most efficient manner.
The following ASX products use ASX Trade for executing orders:
- Exchange Traded Funds
- Exchange Traded Options
- Index Options
- Interest Rate Securities
- Australian Government Bonds
This platform allows customers access to products that essentially trade around the clock (* Trading on the ASX takes place 21 hours and 50 minutes each day / 6 days a week).
The following ASX products use NTP for executing orders:
- Interest Rate Futures and Options
- Equity Futures and Options
- Agricultural Futures and Options
- Energy Futures and Options
What Types of Memberships Does ASX Offer?
To become a participant on the ASX, applicants choose between three classes of participants. Participants are allowed to obtain more than one class of participation:
Trading: Traders can choose to be a trading participant and provide execution services for their organization and clients or a principal trader and transact only for their account and not clients.
Clearing: Clearing participants can clear trades in the futures, cash and derivative markets. The derivative market requires traders to choose between being a general participant or a direct participant.
Settlement: Settlement participants can settle trades for clients.
Prospective traders should consult the ASX application brochure for additional requirements.
What Are ASX Margin Requirements?
ASX assesses margin requirements based on the specific product category. Traders should consult the appropriate brochures on the ASX website as these rates are subject to change based on market conditions and regulations.
What Fees and Charges Does ASX Assess?
ASX charges a variety of different types of fees to its members. These fees generally fall into one of four categories:
- Participation Fees
- Cash Market Trading Fees
- Designated Trading Representative Fees
- Listed Funds, Warrant and Structured Product Fees
Participants pay both application and annual fees based on the class or classes of participation they obtain. In addition, ASX charges a $100 late lodgment for fees not paid on time.
Cash Market Trading Fees
Traders pay fees in the form of basis points for trade executions. These fees are based on the security and order type and the platform used for execution.
Designated Trading Representative Fees
Designated Trading Representatives (DTRs) pay fees for exams and training by the exchange.
Listed Funds, Warrant and Structured Product Fees
New fund, warrant and structure product issuers pay application, turnover and annual fees to the exchange based on a variety of different parameters.
For the full details on the amounts of these fees, traders should consult the brochure ASX Trade: Market Participant and Trading Schedule of Fees.
What Market Data Does ASX Make Available?
ASX derives a variety of types of market data directly from its trading platforms – ASX Trade and NTP:
Price Data: Participants and customers of the exchange can enter into license agreements with ASX to obtain either real-time delayed or end-of-day market data depending on their needs.
Company News: ASX offers a proprietary news service called ASXComNewsTM. The service reports announcements in real time by all of the companies listed on ASX. The information is displayed in graphically-enhanced PDF documents.
Voiceline: ASX offers a loudspeaker service that announces sensitive company information as soon as it becomes available. The service is designed for professional dealing rooms.
ReferencePoint™: A market information service that provides reports on the following:
- Corporate Actions: ASX processes 13,000 company announcements annually that can affect share trading. ASX makes this information available either intra-day or end of day.
- Dilution Factors: A file that shows change in capital for companies.
- Derivatix: A file that shows complete information on ASX derivative markets.
- Broker Trades: A trade-by-trade historic record of broker transactions.
- Market Shares: This end-of-day report shows broker activity by shares.
- Course of Sales: A complete list of every trade transaction on every instrument with broker IDs masked.
- Daily Official List: A theoretical portfolio valuation price and closing price, volume and value information.
- Master List: Contains full reference data on issues and instruments for all ASX trading instruments.
What Course and Educational Materials Does ASX Offer?
ASX offers a vast array of educational resources on its website.
Courses: Traders can take basic, intermediate or advanced courses each of the different product categories traded on the exchange. Each course typically consists of several modules that take between five and 30 minutes each to complete.
Games: ASX offers games on share markets for adults, teachers and school children.
Investment and Finance Newsletter: ASX publishes a newsletter on the second Tuesday of each month. The newsletter covers analyses, trends and ideas for medium and long-term investments. Subscription to the newsletter is free to the public.
Finance Seminars and Webinars: ASX offers seminars that cover market topics as well as information on new ASX products and services.
Research and Surveys: ASX compiles reports on studies related to trader behavior. These reports could be valuable in formulating trading strategies.
Glossary: The ASX website publishes a comprehensive glossary of trading and investment terms.
MyASX: This is a collection of free share trading services. MyASX lets traders create personal watch lists, subscribe to monthly email newsletters and play the ASX share market games.
Investment Videos: The ASX website publishes timely videos on investment themes.
First-time Investors: ASX offers resources to help first-time traders understand trading, learn about different investment classes and hone investment strategies.
What Innovative Technology Is ASX Pursuing?
ASX is replacing the system used to process trades in Australia. For the past 20 years, CHESS (Clearing House Electronic Subregister System) functioned as the system for clearing and settling trades in Australia. As with systems in other developed countries, CHESS relies on a T + 2 settlement framework, which allows trades to settle with almost no errors.
However, ASX believes that distributed ledger technology (DLT), which is the same technology used to create cryptocurrencies, offers the potential for better and more efficient results for market participants. ASX is working to develop, test and demonstrate a working prototype of this system.
Such a system, if successful, would revolutionize the settlement of trades in the cash equity market.
Does ASX Have Vendor Partners?
ASX partners with a number of vendors that provide specialized data services to ASX market participants.
A complete listing of these partners and the ASX platforms for which they provide data is available in the publication Australian Securities Exchange Information Vendors Guide. Traders may find this list useful since it gives a good summary of the services available to traders on the ASX platforms.