2. Chapter 1
Introduction of ASX
ļ 1.1 Brief Introduction of ASX
ļ 1.2 Function of ASX
ļ 1.3 History of ASX
ļ 1.4 Timeline of significant events
4. 1.1 Brief Introduction of ASX (continued)
ļ The major market index is the S&P/ASX 200 which is
made up of the top 200 shares in the ASX and it runs
parallel to the All Ordinaries index.
ļ The current Managing Director and CEO, Mr Elmer
Funke Kupper, was appointed in October 2011.
5. 1.2 Function of ASX
Subsidiaries Services handled Components
Australian Securities Exchange Primary, secondary and ASX (formerly Australian Stock
derivative market services Exchange) and ASX 24 (formerly
Sydney Futures Exchange)
ASX Clearing Corporation ASXās clearing services ASX Clear (formerly the
Australian Clearing House) and
ASX Clear (Futures) (formerly
SFE Clearing Corporation)
ASX Settlement Corporation Settlement services ASX Settlement (formerly ASX
Settlement and Transfer
Corporation) and Austraclear
ASX Compliance Ongoing monitoring and Replaces ASX Markets
enforcement of compliance with Supervision
the ASX operating rules
TABLE 1.1 Services and components of subsidiaries
6. 1.3 History of ASX
ļ The ASX Group's origins as a national exchange date back to 1987
when the Australian Stock Exchange Limited was founded through
incorporation under legislation of the Australian Parliament that
enabled the combination of six independent state-based stock
exchanges.
ļ In 2006 The Australian Stock Exchange merged with SFE
Corporation, holding company for the Sydney Futures Exchange.
ļ Later ASX launched a new group structure and from 1 August 2010
the Australian Securities Exchange has been identified as the ASX
Group.
7. 1.4 Timeline of Significant Events
ļ 1987
ļ The Australian Stock Exchange Limited (ASX) was
established on 1 April 1987. Also in 1987, the all-electronic
SEATS trading system was launched. It started on just a
limited range of stocks; progressively all stocks were moved to
it and the trading floors were closed in 1990.
ļ 1993
ļ Fixed-interest securities were introduced. That same year the
FAST system of accelerated settlement was established, and
the following year FAST was replaced by the CHESS system .
ļ 1998
ļ The ASX became listed in 1998 which was the first exchange
in the world to have its shares quoted on its own market.
8. 1.4 Timeline of Significant Events (continued)
ļ 2002
ļ Following the lead of the ASX four years earlier, SFE Corporation
demutualised in 2000 and listed on ASX in 2002.
ļ 2006
ļ The ASX announced a merger with the Sydney Futures Exchange, the
primary derivatives exchange in Australia, thus the combined entity became
the 9th largest listed exchange group globally.
ļ 2010
ļ ASX Market Supervision changed its name to ASX Compliance to reflect the
change in the regulatory environment. The Australian Securities Exchange
launched a new brand structure on 1 August 2010, which means that it
became known as ASX Group.
ļ At The Same Year, ASX was (25 October 2010) in merger talks with
Singapore Exchange (SGX). The merger was blocked by the Australian
Federal Treasurer on 8 April 2011 as it finds the proposed merger to not be
in the best interests of Australia.
9. Chapter 2 Size of ASX
ļ 2.1 Number of securities listed on ASX
ļ 2.2 Total market capitalization of securities listed on ASX
ļ 2.3 Analysis of size of ASX
10. 2.1 Number of Securities Listed on ASX
Year Number of securities Annual growth rate of
listed number of securities
FY06 1,930
FY07 2,090 8.29%
FY08 2,226 6.51%
FY09 2,198 -1.26%
FY10 2,192 -0.27%
TABLE 2.1 Number of securities listed on ASX Source: ASX Annual Report 2010
11. 2.2 Total Market Capitalization of Securities Listed on ASX
Market capitalization of
Annual growth rate of
Year securities listed on the
market capitalization
exchangeļ¼$bnļ¼
FY06 1,207
FY07 1,598 32.39%
FY08 1,415 -11.45%
FY09 1,098 -22.40%
FY10 1,254 14.21%
TABLE 2.2 Total market capitalization of securities listed on ASX Source: ASX Annual Report 2010
12. 2.3 Analysis of Size of ASX
2,500
2,226 2,198 2,192
2,000
2,090
1,930
1,598
1,500
1,415
1,254 Number of securities listed on the exchange
1,207
1,098
1,000
Market capitalization of securities listed
($bn)
500
0 FIGURE 2.1 Changes of ASX size
FY06 FY07 FY08 FY09 FY10
13. 2.3 Analysis of Size of ASX (continued)
40.00%
32.39%
30.00%
20.00%
14.21%
10.00% 8.29%
6.51%
annual growth rate of number of securities
annual growth rate of market capitalization
0.00%
FY07 FY08 FY09
-1.26% -0.27%
FY10
-10.00%
-11.45%
-20.00%
-22.40%
FIGURE 2.1 Changes of ASX size
-30.00%
14. 2.3 Analysis of Size of ASX (continued)
ļ According to the above graphs, it is clear that size of
ASX became more volatile from FY08.
ļ This can be explained by the profound economic impact
of the international financial crisis.
ļ Global equity market retreated significantly in the
second half of FY08 because of the tightening in the
supply of credit , Australia was no exception.
15. 2.3 Analysis of Size of ASX (continued)
FIGURE 2.3 Key financial ratios Source: ASX Annual Report 2010
16. 2.3 Analysis of Size of ASX (continued)
ļ As it happened in the second half of the year, EPS and Dividends
per share had not been affected significantly while they dropped
dramatically in FY09.
ļ However, Share price began to decline as early as FY08. The stock
market price is a leading indicator.
ļ Overall, changes of size of ASX was consistent with that of financial
ratios.
17. 2.3 Analysis of Size of ASX (continued)
ļ Faced with a more difficult economic environment, ASX adopt a
range of measures such as well-trained supervision
personnel, efficient and effective processes, and fit-for-purpose
technology.
ļ These helped ASX through the rough times. As we can see, the
size of the ASX recovered gradually in the year of 2010.
Accordingly, EPS and Dividends per share climbed slightly in FY10.
18. Chapter 3 Listing Process
3.1 Criteria for Listing
To ensure the quality of the market, ASX sets out a list of specific requirements which an
organization has to meet to list its shares on ASX.
ļ¬ structure, size and number of shareholders
Number of shareholders
ASX Listing Rules 1.1, condition 7 (a) ASX Listing Rules 1.1, condition 7 (b)
Minimum 500 investors @ A$2,000 or Minimum 400 investors @ A$2,000 and
25% held by unrelated parties
Source: IPO: the road to growth and opportunity
Company size
Profit Test in Rule 1.2 Assets Test in Rule 1.3.1
A$1 million net profit over past 3 years A$2 million Net Tangible Assets or A$
+ A$400,000 net profit over last 12 10 million market capitalization
months
Source: IPO: the road to growth and opportunity
19. 3.2 Issues Need to be Concerned
ASX suggests: before going public, the company should have some issues fully considered
Issue #1: the disclosure requirements and ongoing reporting.
ļ¬higher degree of transparency
ļ¬ābusiness secretā to the public
ļ¬uneasy with the greater disclosure of salaries
ļ¬time consuming
Issue #2: the sensitivity to the market condition and possibility of out of control.
ļ¬companiesā share prices are easily influenced
ļ¬certain corporate transactions need outside approvals.
ļ¬potential of being took over
Issue #3: the cost of listing, maintaining listing and raising additional capital
ļ¬underwriting or brokerage fees,
ļ¬accounting, legal and other professional fees, prospectus costs
ļ¬ASX listing fees
20. 3.3 Major Steps of Listing
The time management for listing is important
- three months to two years (typical six months)
listing process - eight steps
Step 1 - appointing advisors
ļ¬choose quality professional advisers
- able to assist the company with a wide range of issues.
ļ¬starting with the existing accountants, advisers and solicitors
1. have the skills, experience and expertise dealing with the IPO
2. familiar with the companyās current business.
ļ¬seek outside advisorsā help
- prepared key information of the companyās current business and
financial position
ļ¬who can be sought advice from:
corporate advisers, stockbrokers and investment banks, underwriters,
lawyers, accountants, other experts etc.
21. 3.3 Major Steps of Listing (continued)
Step 2 - talk to ASX
preliminary stage
ļ¬ASX and companies - find out the potential of the companiesā business
ļ¬ASX - provides general guidance on the IPO process and advises
more advanced stage
ļ¬ASX - clarifies issues from regulatory, structural and constitutional aspects
- answer queries regarding the ASX Listing Rules and general business issues
Step 3 - preparation of prospectus and due diligence
1. Prospectus - required for companies offering shares
ļ¬company background, board and management and financial status etc.
ļ¬form a valuable assessment of the offer
2. The due diligence process
ļ¬Corporations Act (liability provisions)
- making false or misleading statements in, or material omissions
- applied to key participants who preparing the prospectus
ļ¬due diligence committee
- verify the information disclosed in the prospectus very carefully
22. 3.3 Major Steps of Listing (continued)
Step 4 - lodging the prospectus
ļ¬prospectus lodged with Australian Securities & Investments commission (ASIC)
ļ¬within 7 days after lodgment - cannot accept subscriptions
ļ¬period extends to 14 days - amendments are required
ļ¬order issued to stop the offer at the end of the period
- cannot meet the criteria of the Corporations Act
- may need to provide a supplementary prospectus
Step 5 - applying to list
ļ¬within seven days of lodging prospectus with ASIC
- submit its listing application with relevant admission fees to ASX
- ASX reviews the application and prospectus
Step 6 - the IPO period
ļ¬after the exposure period
- prospectus is printed
- offer is officially launched
ļ¬conduct roadshows to market the offer
23. 3.3 Major Steps of Listing (continued)
Step 7 - admission
ļ¬ASX Listing Advisers
- additional information seeking to assess the application
ļ¬admitted to the ASX Official List
ļ¬trading commences once certain conditions have been met
Step 8 - commencing trading
ļ¬start writing the outcome once listing application has been considered
ļ¬outcome contains:
- conditions to be met before admitted to the official list
e.g. raising the minimum subscription amount
- conditions to be fulfilled before quotation can commence
e.g. dispatch of holding statements.
ļ¬shares quoted on ASXās trading system and ASX TradeMatch.
24. 3.4 International Listings on ASX
ASX listing
ļ¬almost same admission requirements which apply to an Australian entity
ļ¬regardless whether listed on another stock exchange
ASX Foreign Exempt listing
The foreign companies
ļ¬already listed on another stock exchange
ļ¬outstanding profit history
ļ¬notable net tangible assets
many of ASXās ongoing listing rules do not apply to those companies
- eliminate dual regulation and compliance burden
Overseas exchange Company size Number of shareholders
The entityās overseas home A$200 million profit before At least 1,000 holders each
exchange must be a tax for each of the last 3 having a parcel of
member of the World years or At least A$2,000 securities with a value of at
Federation of Stock million net tangible assets least A$500
Exchanges (WFE)
Source: International listing on ASX: the road to growth and opportunity
25. Chapter 4 Trading System
The current trading system, which takes the latency
down to 300 microseconds, is based on NASDAQ OMXās
Genium INET system.
ASX is previously the South East Asia regionās leading
market.
26. Trading Platform
TradeMatch
PureMatch
10am-4pm
24 hours
VolumeMatch
equity and interest
related equity rate, equity index
derivative and commodity
products derivatives
28. Equity Market Phases (Sydney Times)
7am-10am Pre-open Brokers enter orders into ASX Trade in preparation for the market opening. Investors may
enter orders on-line. The orders are queued according to price-time priority and will not
trade until the market opens.
10am* Open ASX Trade calculates opening prices during this phase.
10am-4pm Normal In this phase ASX Trade automatically matches all trades in Price/Time Priority on a
Trading continuous basis.
4pm - 4:10pm Pre CSPA Trading stops and brokers enter, change and cancel orders in preparation for the market
closing.
4:10pm-4:12pm CSPA Closing Single Price Auction. ASX Trade calculates closing prices during this phase.
4:12pm-5pm Adjust Brokers may ātidy upā their orders by cancelling unwanted orders, amending orders, etc.
5:00pm-6:50pm Adjust ON New orders cannot be entered. Brokers wishing to trade contact each other by telephone.
6:50pm-6:59pm Purge Orders that are expired, too far from market etc. will be centrally inactivated or purged.
Orders
6:59pm-7pm System Administration or system adjustment session.
Maintenance
7pm-9:30pm Close No Trading Messages may be entered or amended in ASX Trade and no matching or
Auctions take place.
9:30pm-2:25am System The system process the night batch during this session state, this involves the update and
Unavailable addition of securities.
2:25am-7:00am Close No Trading Messages may be entered or amended in ASX Trade and no matching or
Auctions take place.
*Random +/- 15 secs
29. Centre Point Order
ļ¬ Execution at the midpoint of ļ¬ Two order types
the best bid and offer ļµ Centre Point Market Order
ļ¬ Execution only with another ļµ Centre Point Limit Order
Centre Point Order ļ¬ A day-only order
ļ¬ For all ASX Cash Equities ļ¬ Without minimum size
ļ¬ Anonymous order size requirement.
30. Central Point Crossing Order
ļ Option to confirm or reject crossing up to 30 seconds after initiation
ļ Full order depth displayed
31. Undisclosed Order
ļ¬ Fully disclosed in terms of ļ¬ When it is partially traded and
execution price but the remaining order value is
undisclosed regarding less than the minimum
execution volume, provided it undisclosed value, the system
remains above the minimum will automatically disclose the
order size of AUD500, 000 remaining volume without
affecting the orderās priority.
32. Iceberg Order
ShownVolume Min. 5000 shares
Volume
Total Volume Max. allowable ratio is 100:1
Step 1 Step 2 Drop to the
Shown bottom of the
volume is Large time queue
immediately limit once
executable order executed
Step 3 Cycle trough
until the total
volume is
executed
33. Trading Cost
SOURCE: a research made by Associate Professor Andrew Lepone and Anthony Flint of The
University of Sydney
34. Reference
ASX Limited ABN 98 008 624 691 (2011). IPO: the road to growth and opportunity. Retrieved 24th
October 2011 from http://www.asxgroup.com.au/listing.htm
ASX Limited ABN 98 008 624 691 (2011). International listing on ASX: the road to growth and
opportunity. Retrieved 24th October 2011 from http://www.asxgroup.com.au/listing.htm
ASX Group (2011). Retrieved 25th October 2011 from
http://www.asx.com.au/trading_services/new_market_services.htm
ASX Group (2011). Retrieved 25th October 2011 from
http://www.asx.com.au/trading_services/asx-trade24.htm
ASX Group (2011). Retrieved 25th October 2011 from
http://www.asx.com.au/documents/resources/asx_trade_new_order_types.pdf
ASX Group (2011). Retrieved 25th October 2011 from
http://www.asx.com.au/documents/trading_services/centre_
point_market_impact_research_paper.pdf
ASX Group (2011). Retrieved 25th October 2011 from
http://www.asx.com.au/documents/resources/shares_course_05.pdf?shares_course_05_text
