In order to understand the overall share market of Australia, you need to delve into the Australian Stock Exchange and its peculiarities.
What is the ASX?
The ASX stands for the Australian Securities Exchange that is the primary national share market for Australia. This securities exchange was founded on 1 April 1987 however origins of the exchange go back to the 1800’s. The overall market capitalization of the ASX is around $1.4T USD as at November 2018 which puts it at around the 16thlargest in the world.
The NYSE is the largest in the world being $22T USD or 20 times the size of the Australian share market. This really puts things into perspective that is for sure – 20 times is a huge number.
Who regulates the ASX?
The Australian Securities and Investments Commission (ASIC) is the regulatory body of the ASX, and have the power to supervise both the listed and unlisted markets. ASIC regulates the entities based on ASX Listing Rules, the ASX operating Rules and various other regulatory requirements.
The biggest entities on the ASX include BHP, Commonwealth Bank, Westpac, Telstra, Rio Tinto, National Australia Bank and Australia and New Zealand Banking Group. These entities have the largest number of shares on issue, and the largest market capitalization on the market.
The main indices on the market include:
S&P/ASX 50 Index
S&P/ASX 100 Index
S&P/ASX 200 Index
These indices are created by global powerhouse Standard & Poor’s listing the largest x number of stocks on the market i.e. 50 index will list the 50 largest stocks based on market capitalization, 100 index will list the 100 largest stocks based on market capitalization etc.
Investors and companies assess the overall performance of the market over a period of time using these indices. For example we can see that the S&P/ASX 50 has increased from $4,898 on May 31 2006 to $6,107 on March 8 2019. This increase over the 13 years can be used to assess the performance of the market. Whilst the increase is large, it needs to be assesse in terms of relevancy to the other markets during that period of time. I.e. the NYSE may have increased by twice as much during that same time period. Whilst both performances may be good, an investor would have been better selecting the better performing market during that period.
Whilst the ASX is the largest exchange in Australia, it is not the only one. There are others that are significantly smaller including the National Stock Exchange (NSX) that is based in Sydney, Australia. This has a market capitalization of around $2.5B AUD (2016) that is very small in comparison to the ASX and the NYSE.
Format of the ASX
The ASX is only open business days being Monday to Friday and not open weekends or public holidays. Therefor when looking at daily historical performance there will always be gaps in the share price representing weekends and public holidays including Christmas, Easter etc.
Generally the timing of the ASX follows this format:
Pre Trading – 7am to 10am
Market Opens – 10am to 4pm
Single Priced Options – 4.00pm to 4.10pm
Sing Price Options 4.10pm to 4.11pm
Market Closed – 4.11pm
Settlement options of the ASX
There are two settlement options that are offered on the ASX being Issuer Sponsored and Broker Sponsored. The main difference between the two is that with a Broker Sponsored settlement the Clearing House Electronic Sub-register System (CHESS) system is used and a HIN is generated which is the unique number to represent the investor and their holdings. In contrast to this is the Issuer Sponsored where the company’s share registry administers the holdings that generate a SRN number. An investor who owns multiple share holdings will only have one HIN if they use the Broker Sponsored method whilst that same investor would have 10 different SRN’s if they opted for the Issuer Sponsored method. Generally the Broker Sponsored method is more common.
These two options have been covered in detail in the article Difference between Issuer Sponsored and Broker Sponsored.
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